Should I Purchase Investment Property?


With rates still near historic lows, purchasing investment property for an additional income stream can be lucrative as many markets are experiencing a shortage in rental property availability. That said, it is important to weigh both the advantages and the risks associated with this type of property purchase. If you currently own or have purchased a primary residence in the past, there are some similarities involved with purchasing investment property, such as the review of bank statements, assets, credit score and income. However, investment property purchases are considered higher risk as there is generally a higher likelihood of an owner walking away from the property than there would be for their primary home. Some housing loan requirements when buying an investment property include:
  • A down payment of 20% is typically required.
  • Credit scores near the high 700 range or higher are ideal but depending on other factors, a score as low as 640 could qualify.
  • Debt-to-income ratios can be less forgiving than when buying a primary home.
  • Interest rates tend to be higher when purchasing investment properties.
  • Proof cash reserves on hand, generally 3-6 months or 2% of the mortgage balance, will be needed.
  • Decreased availability in FHA and VA financing options; however, if you are buying a multi-unit property and intend to live in one of the units, you may be able to show eligibility.
Additional items to consider are the location in which you are buying as it is wise to search for areas with lower property taxes, higher rated schools, and overall walkability. Bedroom count is another consideration often overlooked but can make or break a rental property. A three-bedroom home can be rented to a group of three people, allowing them to split the rent more, so it can fetch a higher rent than a similarly priced 2 bedroom home. It is also important to determine if you are comfortable being a landlord or paying an additional monthly expense to hire a property management company. Last but not least, consider your overall budget as you will not only be covering closing costs on the mortgage, but also unforeseen costs for repair and damages, and you’ll still be paying the mortgage even if your space is tenant-free for an extended period of time. Our team of mortgage professionals is happy to help decide if an investment property purchase is the right step for achieving your short and long-term financial goals.

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Spire Financial, a division of AmeriFirst Financial, Inc., 1550 E. McKellips Road, Suite 117, Mesa, AZ 85203 (NMLS # 145368). 303-595-0110. © 2022. All Rights Reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all loan amounts. Other restrictions and limitations apply. AmeriFirst Financial, Inc. is an independent mortgage lender and is not affiliated with the Department of Housing and Urban Development or the Federal Housing Administration. Not intended for legal or financial advice. Visit https://amerifirstloan.com/pages/state-licensing for all state licenses information. Visit NMLS Consumer Access at https://www.nmlsconsumeraccess.org/

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