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Well, you’re not alone. Many people are looking for more sustainable, long-term income. Especially right now, as many people are taking advantage of less competition in the market. Let's review where the market is, and the different types of financing that can help you reach your investment property dreams. Ready, set, shop.
See what you qualify for. No-impact credit check. No commitment.
It’s currently Fall 2023, and the housing market is what is described as “balanced.” It’s no longer a seller’s market, and is more equitable to both buyers and sellers thanks to a cooled-down market and higher interest rates. No one wants a higher rate, of course, but it does help lessen the competition for properties, which you can use to your advantage.
There is also a chance for finding a better deal on a property based on investors looking to free up their assets. It truly depends on the area you’re looking to buy, and in some cases, the individual property you’re able to find.
Our job here at Lower is to get you ready when you find it. (Just give us a few details and we’ll be in touch shortly.)
Which brings us to our expertise—financing your investment property. There are a few different ways to get the job done, and they all depend on your personal situation.
Buying an investment property under normal circumstances requires you to qualify for the property AND your current property at the same time. That can be tough for those just getting started, but also for experienced investors with reduced net incomes due to deductible expenses. So, no matter how experienced an investor is, it can be harder to get approved for a conventional loan. But there are options.
If you’re wondering if you can go the traditional financing route, keep these things in mind:
You can use rent from the prospective rental property to help qualify.
If the property is currently rented and the lease will carry over, you can use that lease as income to help qualify, saving you the trouble of finding a new tenant!
Even if it is not currently rented, you can have an appraiser find the "Fair Market Rent" for the area and similar to a lease we can use 75% of that.Using the rent from the prospective rental property is huge—especially for self-employed buyers. But, if this option don’t work for you, you’ve got options. That’s where alternative financing comes in.
For both novice and experienced investors, a loan that considers the rental income of the property can be the key to getting qualified. (And it’s more common than you may think!) It’s called a Debt Service Coverage Ratio (DSCR) Loan, which is not as complicated as the name might suggest. The ratio it refers to is simply the income of the soon-to-be rental, divided by any debt you carry on the property.
If you’re a novice investor, a DSCR loan allows you to get started without having all of the income or job history to qualify—in fact this loan doesn’t even look at your personal income. For experienced investors, the DSCR loan allows you the same advantage—qualifying for the loan based on potential rental income instead of personal income. This comes in handy for those with lower net income due to tax deductions. Brilliant.
“A DSCR loan allows you to start investing without having all of the income or job history to qualify.”
While we’re on the subject of alternative financing, we should talk about another option that doesn’t require W-2 income. Bank statement loans. To verify your income, a bank statement loan simply looks at your bank statement. If you haven’t been in your field for 2 years, are self-employed, or make most of your income from investment properties, a bank statement loan could be for you.
Here at Lower, we’ve helped thousands of people finance their investment homes. (30,000+ five-star reviews, too.) If you have questions or are on the fence about investing in property, just tell us a bit about you and we’ll call you shortly!
By purchasing an investment property now, you’re starting the habit of building equity. Sure, that investment in the current market will come with a higher interest rate, but there are options to lower your rate now, and in the future.
For example...
When you buy a home with Lower, you automatically get Free Refi for Life. That’s no lender fees when you refinance with Lower when rates drop. It saves you at least $1,000 every time you refinance. We’re here to help property investors and homeowners for the long run—start the convo here.
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All loans are subject to underwriting or investor approval. Some restrictions may apply. This is not an offer of credit or a commitment to lend. Guidelines and products subject to change. Rates and terms may vary depending upon risk analysis, collateral, and other factors. Call 844-645-6937 for details and qualifying information.
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