How to Get a Mortgage on a Rental House

Real-estate investing is an excellent way to earn passive income. As a landlord, you'll purchase homes and find tenants for your properties. Your tenants pay the monthly rent, and you're able to earn money off the deal each month. Of course, to become a real-estate investor and acquire rental houses, you'll have to qualify for a mortgage loan.

Difficulty:

Moderate

Instructions

Things You'll Need

• Credit report Down payment

1. Maintain a good credit history. Your credit history determines whether you'll qualify for a loan on a rental house and the interest rate you'll receive on this loan. Check your credit report before applying for a loan. Create a plan to eliminate credit card debts and pay your creditors on time.

2. Gather your personal income statements. Mortgage lenders will ask for detailed information about your financial history. Be prepared. Make copies of your W-2's, tax returns for the past two years and bank statements. They may also request copies of your most recent paycheck stubs.

3. Have upfront cash for mortgage fees. Buying a rental house is expensive. To obtain a lower interest rate, save money for a down payment: at least 3 percent of the sale price. Also, you'll need cash for a home inspection, home appraisal, closing costs, credit report fee, application fee and title search fee.

4. Talk to a lender about investor loans. There are different types of mortgage products, and some lenders offer only owner-occupied mortgages, which are not available to real-estate investors. Inquire about nonowner-occupied or investor loans.

5. Compare mortgage loan rates. The interest rate on your mortgage loan determines the mortgage payment. To get the best rate, contact at least three lenders and ask for a rate quote. Based on your financial information, lenders will estimate an interest rate, monthly payment and settlement fees.

6. Sign your loan documents. After choosing a mortgage lender and product, schedule your loan closing. Sign your loan papers, and obtain the keys to your rental house.

Resources

• Get a Copy of Your Credit Report
• Lending Tree - Compare Mortgages
• My Fico - Improve Credit Score