What You Need to Know Before Applying for an Investment Property Loan

Contributing Writer, B2R Finance | Financing

By Kerry Curry, Contributing Writer

Applying for an investment property loan is different than seeking a mortgage for an owner-occupied home.

Qualifying for an owner-occupant home loan is typically based on a homeowner’s income, credit score and debt-to-income ratio, which play into the lender’s determination as to whether the borrower has the ability to pay back the loan.

With an asset-based real estate investment loan, the lender will be focused primarily on the property’s cash flow, not the investor’s personal income. Like traditional mortgages, asset-based investment loans can be used for new purchases and for refinances.

B2R Finance and other nontraditional portfolio lenders offer loan products specifically tailored to real estate investors, while FDIC-insured banks may offer real estate investors something more similar to a traditional mortgage.

Here are a few things you should know before applying for an investment property loan from a non-bank lender:

  1. Down payments. While owner-occupants can pay as little as 3% down or even nothing down under some loan programs, investors typically will be expected to put about 25-30 percent down for an investment property loan, perhaps more depending on property type, condition, geography and other factors.
  2. Interest rates. Investment property loans are considered to be riskier than owner-occupant loans and thus may carry a higher interest rate.
  3. Loan terms. A property investor can take advantage of much shorter loan terms, in the neighborhood of 10, seven or even five years. Many lenders now also offer a more traditional 30-year term.
  4. Property statistics. It’s important for the real estate investor to do due diligence on the property he or she wants to buy. The investor should have a good idea of the market value, condition, in-place rent, occupancy statistics and monthly maintenance costs for the residential property under consideration.
  5. Business entity. The lender may require the investor to set up an LLC or similar business entity in order to qualify for an investment property loan.
  6. Reserves or escrow. Some lenders will require an investor to have money set aside to cover high-cost capital improvements such as the replacement of a roof or air conditioner or to have several months of principal and interest set aside.


While it might seem more challenging to qualify for an investment property loan, plenty of investors have taken advantage of this type of financing.. Knowing what to expect will help investors meet the requirements of their lender. Asset-based lending is an excellent option to unlock equity for entrepreneurs who invest in rental properties for a living or invest as a way to supplement other income.

B2R Finance offers rental investors innovative lending products to help unlock equity from existing portfolios and provide the cash needed to build rental portfolios nationwide. For more information about how B2R can help you obtain rental property financing, just call 800-227-8107 or visit http://www.b2rfinance.com/apply-now and follow us on Twitter @B2RFinance.

The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.