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TIN FUNDING GROUP

Rental Property Loans

Permanent Financing for Long-Term Rentals and Vacation Rentals

If you dream of a healthy passive income from commercial property, either through long-term rentals or short-term vacation properties, you may be dismayed by the high cost of getting involved. However, there are plenty of mortgage options to reduce the upfront cost and help you get started as a real estate investor.
An investment property is one that is bought for the express purpose of generating income; this can include short-term renters, long-term tenants, or the profit from a resale, as with house flippers. They may be held for a short period of time or for decades, and they may be either residential or commercial property types.

A rental property loan provides you with the funds you need to buy an investment property, whether that is for short-term or long-term use. A lender will provide funding for a variety of different property types, such as:

  • Long-term residential rentals
  • Short-term vacation rentals
  • Office buildings
  • Fix-and-flip properties, typically residential homes

As a mortgage loan for a commercial building is typically higher risk, they generally have higher interest rates, especially those from private lenders. However, they also have higher loan amounts. You can also choose between short-term loans and those with longer loan terms, giving you the flexibility you need to pay back the mortgage.

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Investment Property Loan Process

The investment property loan process is very similar to any other mortgage loan process. Here’s how it works.

Find a lender

The loan programs available for an investment property are more involved than the loan programs available for an owner occupier. The first step in searching for a lender includes determining which loan programs work best for you. If this is your first rental property, then you should consider a government sponsored loan. If you own multiple mortgage rentals, you’ll want to consider an alternative or Non-QM loan program. Many banks and lenders offer loans for investment properties. Ask your real estate agent or other investors for a recommendation.
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Fill out an application

Be sure to dot all your I’s and cross your T’s to make sure you like the lender before filling out an application for an investment property loan. You don’t want to get an unnecessary hard credit pull.

Move into processing

Like any other mortgage loan, once you apply for an investment property loan, your loan file will move into processing. Here, the loan processor will collect any remaining documentation.

Get funded

Once your investment property loan has been processed, you will move into the closing stage and your loan will be funded.

Investment Property Mortgage Rates

Investment property mortgage rates are higher than those for residential loans because they are a greater risk for the lender. Generally, this means that they are about 125 to 300 basis points higher than that for a residential conventional loan. So, for example, if the current mortgage rate for a 30-year fixed-rate loan on a residential home is 6.75%, the range for commercial real estate loans would be 8% to 9.75%.

We provide a breakdown of current rates, as well as an explanation of the reason they’re higher, in our discussion of investment property mortgage rates.

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Investment Property Loan Qualifications

When qualifying for an investment property loan, the lender will make sure both the property and the borrower meet loan qualifications.

Plan on a 25% down payment. If you have stellar credit, you might only need 15%. If you have less than stellar credit, you may need as much as 35%.

Financial stability is key to success. In addition to a more substantial down payment, plan on having 6-12 months of liquid cash reserves. This will help you in the event of hard times and make sure that you won’t immediately lose the property due to missed payments and foreclosure. You’ll also need to have cash for closing costs and underwriting fees. Further, the larger your down payment, the lower your interest rate and the better your DSCR. Therefore, it is best to have the highest possible down payment.

Lenders tend to vary pricing, terms, and conditions more on loans for rental properties than on owner-occupier loans. Do what you can to raise your credit score before applying. And, importantly, protect your credit score once you’ve applied so your loan closes smoothly. Most lenders will do a hard credit pull to get the full scope of your credit score, so it is wise to be prepared.

Construction is financed separately from rental loans (usually in the form of fix and flip loans or hard money loans), so most mortgage lenders will check to make sure the property does not need any significant repairs.
If you’re applying for an agency or bank loan, get your documents in order. You’ll need pay stubs and tax returns with all of your tax return schedules. Get ready to answer questions about your tax returns for a year or two back. Also, make sure you have sufficient personal income, including any net operating income from your rental properties, to afford the monthly payment on your rental property. If you are applying for a non-qm or alternative loan, you will need to make sure the rental income covers the cost of the monthly payment.
In addition to having a minimum down payment, most lenders also have a minimum loan amount and specific requirements based on their loan programs. A conventional mortgage always has the most stringent requirements, while investment property loans are more flexible. Do your due diligence on the mortgaged lenders you are looking to borrow from.
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Get fast & dependable investment property loans

Tin Funding Group is a leading provider of 30-year financing to investors in single-family (1–4 unit) residential rental properties, including vacation rentals. Visio underwrites its flagship product, the Rental360, based on rental income and borrower credit rather than the borrower’s personal income. As a result, the Rental360 is an ideal financing product for the self-employed investor or the investor who is building a portfolio of rental properties. Key advantages of TFG’s Rental360 program over conventional loans include:

TFG uses either in place or market rents when estimating the property level cash flow.
TFG does not require tax returns or employment verification.
TFG allows a customer to finance their investment properties in LLCs and corporations to shield their other personal assets from potential liability
With proven experience and payment performance, there is no hard limit to how many properties an investor can finance with the Rental360 program
Choosing a specialized rental lender instead of financing all of your investment properties, such as fix and flip projects, through one lender could avoid cross-default provisions. Essentially, through a cross-default provision, if a borrower fails to pay interest or principal on time for one loan, the lender has the right to default the borrower on all of their loans. Fix and flip projects are risky investments, even for the best investors, so it is a good practice to keep your rentals elsewhere.
TFG’s laser-like focus and investment property loan expertise simply cannot be matched.
TFG has mastered financing for vacation rentals.
Usually, a customer obtains cash-out refinance loans from Visio to purchase or improve another rental property. Since late 2015, TFG has financed more than $2.1 billion in Rental360 loans.
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