How to Mortgage a Rental Property

Buying a rental property will require your demonstration of financial strength and favorable credit. You might have the ability to purchase a rental property if you meet the underwriting guidelines for an investment property mortgage. Most banks will require a down payment that equals 30 to 40 percent of the purchase price and liquid reserves to withstand six months of mortgage payments or greater. Typically, obtaining your first rental property is the most challenging, as experienced investors will often extract equity from an existing investment property to facilitate the down payment for another rental property.

Instructions

1. Pre-screen your credit file. Order your credit report using the federal government's AnnualCreditReport.com. Glance over your credit data before seeking a mortgage for a rental property. Correct or dispute any adverse information that requires an update.

2. Arrange your income documents and information or receipts that reflect income for the rental property. Take photos of the rental property. Include pictures of the kitchen, bathroom, family room and the outside of the property.

3. Review your finances. Gather your bank statements, copies of investment statements and details about other liquid assets that you own.

4. Approach your banker to discuss a rental property loan. Ask about the interest rates and terms for investment properties. Decide whether you will move forward to pursue financing from your bank. Present your financial documents should you decide to apply for a rental property loan from your bank.

References

• Freddie Mac: Investment Property Mortgages
• Financial Web: Some Handy Rental Real Estate Tips

Resources

• MSN Money: Do You Have What it Takes to be a Landlord?
• Annual Credit Report: Request Your Free Annual Credit Report