Investment Property Loans Guide: Success to Maximize Your Property

Investment Property Loans Options 2022

With property prices soaring in recent years, and first-time homeowners and investors having even more trouble finding funding for their dream homes, loans have become key. Investment Property Loans in particular are playing an ever-growing role in providing funding for investments and homes. In this article, we’ll be looking at which investment property loans options are the best, and where to get the best rates. 

What are your Finance Options When Buying a Property?

While less conventional loan options exist, we have chosen four of the most common and effective to analyze: 

Conventional Bank Loan

Most investors’ preferred way of acquiring property is taking a traditional bank loan. These loans are probably recognizable to you if you are a house owner. If a bank loan follows the rules set out by Frannie Mae and Freddie Mac and is not guaranteed by the government, it is known as a conventional mortgage.

Keep in mind that, even though you’ll go through the same procedure as when applying for a mortgage on your primary house, the requirements for obtaining a traditional loan are tougher. Investment Property Loans are a serious business and could cost you dearly if not approached seriously. This is because you’ll be carrying a mortgage on both your home and investment property. Therefore, your lender will always look into whether you can afford to pay back both loans.

Hard Money Loan

There are lending companies that specialize in financing for real estate investors. Oftentimes, hard money loans are more easily and quickly attainable than bank loans. An investor’s income and credit score aren’t as important to a hard money lender as the value of the investment property. This may be why they’re such a popular form of Investment Property Loans. 

To be clear, however, this form of investment loan is ideal for investors who aim to flip the property rather than earn continuing rental income. A hard money loan is a short-term loan, in other words. Typically, these loans have a three-year repayment period. Keep in mind that the interest rate on these loans is typically considerably greater than what you’d get from a traditional lender. 

Private Money Loan 

Unlike a hard money lender, a private money lender is not an expert in the real estate sector. As a matter of fact, this person is merely a private investor that is searching for a decent return on his or her money. Your personal network of relatives and friends may be able to help you identify a private lender, as well as people you’ve met via real estate investing.

For investors who are unable to secure a bank loan, these loans could be the answer. This type of loan has a lower interest rate and more lenient qualification criteria because of the familiarity between lenders and borrowers. These loans are, however, frequently backed by a promissory note, which means that if you fail to make your monthly mortgage payment, you might lose your property.

Home Equity Loan

How does a home equity loan work? If you currently own a house, you may be eligible for a home equity loan to help fund your investment property. With a home equity loan, you may borrow against the equity you’ve built up in your house. Borrowing up to 80% of your home’s worth is a common practice for many homeowners. 

An appraisal of your house’s worth, your income, and your credit score are often all that is necessary to get authorized for a home equity loan. In addition to the simplified application process, this sort of mortgage loan provides another benefit: a competitive interest rate. If you stop making payments, the lender will have a basis to foreclose on your primary house, which is the disadvantage of this strategy.

Top 3 Investment Property Loans Options in 2022

Investment Property Loan 1: Citibank

With a loaded toolbox of options for property loans, low-down-payment options, and products for investors, CitiBank is the no.1 lender of choice. Their fees and rates are some of the most affordable in the whole business, meaning they care for their clientele. When it comes to single-family home lenders, there isn’t a better option. 

Pros:

  • A multitude of loan options available 
  • Mortgages rates can be personalized on their website 
  • Some of the lowest fees and rates in the lending business 
  • Offer the HomeRun program, which helps with low-down payments 

Cons:

  • When applying for mortgages, charges apply 
  • The aid of a mortgage loan officer is required in order to complete an online loan application

Citibank, which started in New York City in 1812, offers a variety of financing options for individuals who want to invest in single-family homes.

Financing options range from your time with the bank. The range is between five and thirty years of loyalty. There are both fixed-rate and adjustable-rate mortgages to choose from. For single-family houses, Citibank ranks as the top bank because of the width of its financing options and reasonable interest rates.

In most cases they can lend up to $548,250. Additionally, in select high-cost locations, they give up to $822,375. Citibank even offers a jumbo loan that can suit your demands. Jumbo loans need better credit scores yet permit those lending to get larger loans. However, greater loan-to-value ratios will apply.

Credit scores

If you have a credit score of 620, you are eligible to receive a normal mortgage. Jumbo mortgages, on the other hand, have higher restrictions. Commercial, multi-unit, and residential properties are all available for Citibank financing. That is, of course, if you’ve gone over the conventional loan restrictions.

Rate savings and closing cost credits

In order to get rate savings and closing cost credits, Citibank clients who already have a deposit account with the bank must set up automatic monthly mortgage payments from this account. The current interest rates for 15 and 30-year fixed-rate mortgages are 2.375% and 3.125%, respectively. APRs (Annual percentage rates) of 2.653% and 3.301% are standard. 8 As long as you haven’t taken out more than ten previous loans with Fannie Mae (The Federal National Mortgage Association), you’ll be eligible for these terms.

Single Blanket Loan

For your eleventh investment property acquisition, you may want to seek a single blanket loan. This is where you consolidate all 10 properties’ debts into one payment. As a result, you’ll once again be able to apply for an affordable traditional mortgage.

In the event that you do not combine your mortgages, you will have to look for alternative possibilities. Among these are options such as private lenders, investor loans, or hard money lenders. Typically, these options carry a higher interest rate and may have a prepayment penalty associated with them.

The underwriting process is expected to take between 30 and 60 days. Despite this, Citi does not make this information public. Citibank mortgage applications can be started over the phone, online, or in-person in select areas. You can get pre-approved for a loan if you apply online. 

Investment Property Loan 2: Lendio

With Lendio, finding the best Investment Property Loans is within arms reach. The marketplace platform the company offers is the simplest path for investors to complete applications. Additionally, they can receive offers from battling competitors, and choose the best options available. 

Pros:

  • Applications take as little as 15 minutes to complete!
  • A wide array of lenders is available 
  • A multitude of financing options on offer 
  • Top experts available to offer personal guidance through the loan-getting process 

Cons:

  • Some loans carry exceedingly high-interest rates 
  • In order to check out loan terms, an online application has to be filled out 

In only a few minutes, customers of Lendio’s marketplace can receive possible commercial loan offers from 75+ lenders. This service is free of charge to investors. Lendio has successfully funded over 300,000 loans, earning them a solid track record of accomplishments in the lending industry. 

Investors in commercial real estate benefit greatly from online marketplaces like Lendio. These marketplaces allow them to rapidly and effectively compare loan arrangements. In contrast to other commercial real estate possibilities, they simplify the process. They do so by allowing you to compare rates through a single application.

Rates at Lendio

Loans from Lendio lenders are applicable for purchases of single-family and multi-family homes or commercial buildings. If you qualify for an agency loan, such as an FHA one, your down payment may be as small as 3.5%. To avoid this need, more standard commercial real estate lending programs only allow for a down payment of 25% to 30%. 

Lendio’s commercial property loan interest rates begin at 4.25%. Funding takes a minimum of 45 days for terms ranging from 20 to 25 years. The loan levels for commercial real estate range from $250,000 to $5,000,000. For a smooth underwriting process, Lendio provides a set of recommendations.

Prepare purchase contracts, market analysis, property blueprints, project budgets and scopes, and appraisal of the property’s current problems. Doing all of that will facilitate a much simpler lending process. A 15-minute online application is all it takes to start the process. After choosing a lender, the exchange of paperwork occurs almost instantly.  

Investment Property Loan 3: LendingOne

If you are looking for the best rehab lender available, look no further than LendingOne. It is one of the few lenders through which getting pre-approval letters is simple. Additionally, they will finance as much as 90% of the loan-to-cost, as well as provide fees and rates lower than most competitors. 

Pros:

  • Rates and few are low 
  • Leverage is high
  • Proof-of-funds/Pre-approval possible within moments
  • The founders have a commitment to overcoming the average limitations of lenders 

Cons:

  • Each draw costs around $150
  • No commercial property loans are available

As a result of their dissatisfaction with the challenging lending climate brought about by stringent bank requirements, Bill Green and Matthew Neisser created LendingOne in 2014. Proof of funds and Pre-approval letters are two of LendingOne’s most valuable assets. Additionally, better leverage and lower rates and fees than most competitors make them the top rehab lender in the industry.   

Fix-and-Flip

Rehab-to-rent and Fix-and-flip loans are the specialties of LendingOne. Ten to twenty percent of the total cost of a home is the deposit rate. They provide 30-year fixed-rate loans, as well as ARMs with terms of 5/1 and 7/1, all for rehabilitating rental properties.

Fix-and-flip loans from LendingOne can cover up to 90% of users’ repair expenses. The fix-and-flip loans also allow for two years of interest-only payments. Only properties with two to four units, such as condominiums and townhouses, are eligible for LendingOne loans. The bare minimum for a loan at LendingOne is $75,000.

Interest Rates

Loan terms and interest rates depend on a variety of factors, including income, credit history, and the loan-to-value ratio. They’re also honest about their prices, and the loan product page does not mention fees or closing charges. A credit score of 680 is the requirement, however, this might vary on a product-to-product and case-to-case basis. 

An investor’s additional underwriting needs to include a bank statement, certification that you are purchasing the property for business or investment purposes, and a list of properties you already own. The list of requirements goes on.

Requirements for getting the loan

With an operating agreement for your business entity, purchase and sale contract, driver’s license, lease agreement if the property already has a tenant, and six months of cash reserves all being requirements. You may apply for a rehab loan with LendingOne over the phone or online in as quick as ten days. This sort of efficiency is what you should expect from all Investment Property Loans options.