Qualifying for a Home Loan
Whether you’re looking for your first investment property or want to add one more short-term rental to a growing portfolio, having the assets to back your offer is crucial to your success. If making a cash offer isn’t an option, qualifying for a home loan is a great alternative. Before you start looking for a new property, it’s important to work with a lender to get pre-qualified for a home loan. This documentation proves you have a lender that verified your financial qualifications and ability to handle a loan payment. So how do you qualify for a home loan, and what type of loan should you get if you plan to be an investor in the short-term rental market?
Save Your Paperwork
In the digital age, qualifying for a home loan requires a lot fewer phone calls, making the process more streamlined than ever. Many loan companies have automated interfaces where loan applicants can answer questions, upload legal documents, and send tax documents straight to the lender. There are no more faxes or snail mail requirements for passing documents back and forth.
To make this process more seamless, have your tax software open so that you can download your previous years’ tax returns, 1099 forms, bank statements, and more. You’ll also need to report paystubs and provide government-issued identification, other mortgage statements, and proof of other existing assets. Thankfully, digital portals make it easy to submit this information any time of day instead of waiting for a phone call. Start this approval process before you look for a new property so you know what dollar amount you can afford for your next acquisition.
The qualification process doesn’t take long at all once your lender has all your information. They should be able to make a clear decision about how high your loan limit will be so you can start looking for houses.
Decide on the Type of Loan
When it comes to investment properties, there are many types of loans that you can use to purchase a new property. Here are the most common types of loans that investors use when they already own at least one rental property:
- Conventional bank loan
- Hard money loan
- Private money loan
- Home equity loan
The best loan type for one investor depends on the varying needs and financial circumstances of each investor. For instance, a first-time investor can potentially use an FHA mortgage if they buy a 2-4 unit property and live in one of the units. But for second home ownership and beyond, a conventional loan or borrowing against another owned property through a home equity loan would make more sense. However, an investor with plenty of home equity would fare better with a home equity loan compared to another whose properties haven’t had enough time to grow in value. Please consult a professional so you know which loan is the best for you. Not sure where to look? Reach out to one of our agents at OpenAiRE, who can connect you with one of our preferred lenders.
Investment Acquisitions that Work for You
Whether you want to optimize your rentals or look for new real estate investment opportunities, connect with our team at OpenAiRE. We are happy to discuss the process of uptaining a home loan for your investment acquisition and connect you with a preferred lender to get started.