How to Qualify to Buy a Rental House
Financing the purchase of a rental home will require the approval of a mortgage lender. Most banks and mortgage companies have higher qualification standards for investment property loans. You can increase your chances of qualifying for a mortgage by preparing yourself for lender scrutiny. Your credit and financial strength may convince a lender to approve your loan to buy a rental house.
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Instructions
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Identify the type of rental property you want and in what area. Get sold comparisons for the property type in the area where you want to buy. You can get this information by hiring a real estate agent or using online sources, such as Zillow.com. Multiple Listing Service comparables, which you can get from an agent, are the most useful.
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Save money for a down payment. Lenders these days are requiring a minimum of 20% down for investment properties.
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Keep your credit score above 720 points or within 15 percent of the maximum credit score of 850 points to qualify for a rental home loan.
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Review your debt ratio. Add all of your monthly bills. Use a mortgage calculator to estimate your rental home payment (see Resources). Combine your monthly bills with the estimated monthly payment for your rental home. Divide the total debt into the amount of your monthly gross income to view your debt ratio. Buy a rental house that allows you to maintain a debt ratio equal to 30 percent or less.
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References
Resources
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