Work

Contemplating Buying an Investment Property?

Have you been thinking about purchasing an investment property and becoming a landlord?  Getting a mortgage loan for a non-owner occupied property (NOO) is a lot different from purchasing an owner occupied property.  Here’s a brief overview of the main differences to help you get started in the decision-making process:

  1. Down Payment: There are a few investors who will allow you to put 15% down with certain restrictions; however, mortgage insurance will be required, so it’s best to put 20% down.  If you can spare to put 25% or 30% down payment, rate pricing will be a little better as well.
  2. Higher Interest Rate:  To give you an idea, let’s look at a sales price of $200,000 with a term of 30 years and a fixed interest rate.  We will also assume a credit score of above 740.
    • Owner occupied with 20% down-3.625% (APR 3.732%)
    • Non-owner occupied with 20% down-4.625% (APR 4.771%)
    • Non-owner occupied with 25% down-4.125% (APR 4.285%)*
    • Non-owner occupied with 30% down-4.125% (APR 4.237%)*
  3. Cash Reserves: Fannie and Freddie also require cash reserves (available cash funds after closing) to cover the mortgage payment on both the investment property and your primary residence for six months.

If you find a property in Virginia, and you would like a monthly payment and closing cost estimate so that you can figure out the monthly cash flow, email me the MLS listing and the percentage you would like to put down, and I will be happy to provide one for you.  If you don’t already have a realtor who specializes in investment properties, please let me know and I would be happy to recommend one in Richmond, VA.

*For this purchase price, rate pricing is the same with 25% and 30% down because the loan amount on 30% was below $150,000, causing the rate to increase.  The more money you borrow, the lower the rate.  Just think about it this way: if you buy toilet paper in bulk at Costo, you will get a better rate than when you buy smaller quantities at the grocery store.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s