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Mortgage for Investment Property

Hello,

I just recently purchased a house for near the maximum mortgage that I could qualify for. I have two roommates who are pitching in and no other debt, so cash flow is not a problem. In addition, I have an excellent credit score (775).

I would like to buy another property as an investment. Would I qualify for a mortgage, or would the income requirement hold me back? I have 20-30% to put down on the property. Basically my question is, for an investment property are the income requirements the same (ie if I qualify for a $200K mortgage and buy a place for $175K, can I qualify for another place that costs $100K as an investment, or no because that is higher than the $200K I originally qualified for)?

Hope that makes sense.

Thanks!
  • March 09 2011 - San Diego
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Answers (6)

AA is right... not enough info here.  If you post your income, consumer debts, your new and proposed investment housing payment including all property taxes and insurance (and the proposed rental income) that would help.  But to answer your question:

"if I qualify for a $200K mortgage and buy a place for $175K, can I qualify for another place that costs $100K as an investment, or no because that is higher than the $200K I originally qualified for)?"

No. Your original qualification for 200K was based soley on you buying your primary residence.  Not multiple properties.  Investment properties have different guidlelines to follow for qualification.
  • March 09 2011
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P.S. 30% down is the sweet spot for investment properties. It's possible to buy with less than 30% down but the terms are less than desirable.

  • March 09 2011
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We'd need to know more information to answer your question, the fact that the investment property + your current mortgage = more than you were originally pre-approved for won't have anything to do with it.

Getting approved for another mortgage will be like getting approved for your first, except it will also take into account your current mortgage payment and projected net income from the new investment property.

Basically, if everything is the same as when you originally bought, and the new property will have a significant positive cash-flow, there is a high likelihood that you would qualify for the investment loan as well.

Please let us know if you have any other questions...

Sincerely,
Greg

  • March 09 2011
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Profile picture for J_Schreiber
I believe you can, but you may have to wait a year; the lender will need proof of rent for 12 months, not sure so check this out. Anyway, it can't hurt to have a of lease and records of the rent your roommates are paying. Check with a lender to see if this would work.

You'll need to prove to your lender that you can afford both places, but I also believe there's a formula that's used for potential rent of an investment property - and the down payment may be a bit higher too.

Contact your lender, or I can send you a few to call, and you should be able to get an idea of what you can do, and when.

Good luck! And, let me know if you have any other questions, or need help finding a viable property.

Regards,
Cory
  • March 09 2011
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To answer your question, the income requirements are more stringent for investment properties, but the difference isn't huge. The down payment and credit requirements are also higher, and this is all because there is more risk to the bank on investment properties (people are more willing to let an extra rental go into default than their own home).

Some lenders will take your rental income into consideration. There is a range of options available. The key to investment properties is really to work with a good lender, and more importantly, to work with an experienced agent who can help you qualify a good rental and help you examine the investment potential (cash flow first and then potential appreciation). You also want someone who is experienced with investment properties so they can help point out some of the potential costs and risks associated with investment properties and rentals.

Please let us know if there is anything else we can do to help.
  • March 09 2011
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Don't have enough to answer your question.  The income that will be generated from the investment property and can be included in your monthly income.  The issue is that the income from your "roomates" cannot be included in your monthly income.
  • March 09 2011
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