Investment Loan Options to
Help Bring Your Vision to Life.

Conventional Loans

A conventional mortgage follows guidelines set by Fannie Mae or Freddie Mac, but it is not backed by the federal government. The standard down payment for conventional financing is 20% of the home’s purchase price. However, the lender may request a down payment of 30% for an investment property.

With a traditional loan, your credit score and history impact both your ability to get approved and the mortgage’s interest rate. Your income and assets will also be reviewed. You  must be able to demonstrate you can afford your current mortgage and the monthly loan payments on an investment property.

Hard Money Loans

These are short-term loans most suited to flipping an investment property instead of buying and holding it, renting it out, or developing it. The advantage of choosing a hard money loan to finance a property flip over a standard loan is that it may be easier to qualify. While lenders still take credit and revenue into account, the primary focus is on the property’s profitability.

The estimated after-repair value (ARV) of the home is used to determine whether you will be able to repay the loan. A hard money loan can also be obtained in days, as opposed to several weeks or longer for a conventional mortgage closing.

The main disadvantage of using a fix-and-flip hard money loan is that it is not inexpensive, with high interest rates and a shorter repayment period. Origination and closing costs may also be greater than traditional financing, reducing returns.

Home Equity Loans

Using your home equity to secure an investment property is possible with a home equity loan, home equity line of credit (HELOC), or cash-out refinance. In most situations, you can borrow up to 80% of the equity worth of your house to go toward the acquisition, rehabilitation, and repair of an investment property.

A HELOC allows you to borrow against your equity like a credit card, and the monthly payments are frequently interest-only. However, the rate is frequently variable, which means it can rise if the prime rate rises.

A cash-out refinance would have a fixed rate, but it could extend the life of your existing mortgage. A longer loan term may result in higher interest payments on the primary residence. This should be balanced against the expected returns from an investment property.

FHA Loans

You can buy a two- to four-unit home with a mortgage backed by the Federal Housing Administration (FHA) and collect rent on the other units to qualify, as long as you live in one of the units for at least 12 months.

VA Joint Loans

The VA multifamily loan program is exclusively for eligible military borrowers. It allows qualifying servicepersons to buy a property with up to seven units, as long as they live in one of the units. The U.S. Department of Veterans Affairs guarantees these loans with no down payment requirement.