Three ThingsYou Must Know About

Rental Property Loans

RENTAL PROPERTY LOANS ARE DIFFERENT.THIS PRESENTATION WILL GIVE YOU A GOOD UNDERSTANDING OF

WHAT TO EXPECT.

Presented By: Brian Bush | SLG Real Estate Loans P. 800-607-1941 x220 www.slglends.com NMLS # 319827

Rental Property Loans Are Different

Even if you are a seasoned real estate investor, it's a good idea to understand why rental property loans are different than owner-occupied single family loans.

To keep it simple, it all comes down to risk. Lenders and those who invest in mortgages consider loans on rental properties to carry more risk than loans made on homes that will be occupied by the borrower. *Historical data suggests that in times of trouble, property owners become delinquent on their rental properties before they do on the homes they live in.

* Source – S.M. Sherlund, Board of Governors of the Federal Reserve System 2008

Added Risk

What To Expect As a property owner, it’s not always easy to understand why all loans of this type of property are lumped together in the same "risk bucket" since some rental properties are less risky than others.

Even rental properties in very desirable locations with more equity and stronger tenants will be included into this risk category. It's best to be prepared for what the general marketplace has to offer for these types of loans.

These Three Things MakeRental Property Loans Different

1. Pricing - since these loans carry more risk, the terms are not as good as those available on owner-occupied residences 2. Qualifying - lenders have higher qualifying standards for these types of loans 3. Guidelines – loan-to-values are lower, there are more restrictions on cash-out and the number of properties financed

Pricing Since these loans carry more risk, the terms are not as good as those available on owner-occupied single family homes. You can expect the interest rate and total fees on rental property loans to be a little higher. Click to see an example of rental property loan rates as compared to owner-occupied loan rates.

As always, for lenders and investors, it's about risk and return.

Don't expect to be offered the same terms on your rental property that you received on the home you own and live in, even if you have perfect credit, employment history, strong qualifying income and a large amount of savings.

Qualifying lenders have higher qualifying standards for these types of loans. There is less flexibility when it comes to credit scores, debt-to-income ratios and savings or reserves when qualifying for rental property loans. See how to calculate your debt-to-income ratio.

The combination of a lower credit score and a higher requested loan-to-value can decrease the chances of a loan approval, or if approved, impact the pricing, making the rate and total costs higher. On the other hand, the combination of a really good credit score and a lower requested loan-to-value can make for an easy loan approval and great pricing. See how to calculate your loan-to-value ratio.

Guidelines Loan-to-values are lower, there are more restrictions on cash-out and the number of properties financed.

Since more equity is required for risk, lower loan-to-values are offered.

There are also restrictions on getting cash out when refinancing a rental property. Getting cash out was almost universally non-existent after the "meltdown“. It is once again allowed, with a few limitations.

Lenders also limit the total amount of financed properties allowed by the borrower. For some lenders the total number of financed properties allowed is four, for others it's ten.

Summary Lenders offering these loans will make adjustments to the pricing, qualifying requirements and program guidelines in order to compensate for the added risk associated with lending on rental property.

There are very good options for financing rental properties right now. Agency programs (Fannie Mae and Freddie Mac) are still available for 1-4 unit rental properties. Interest rates are low and the general credit market is improving.

If you have any questions or would like a quote on a Rental Property Loan,Please contact Brian Bush at 800-607-1941 x220 or bbush@slglends.comVisit: http://www.slglends.com