All lenders are slightly different and have a variety of criteria required to qualify for a loan. But the criteria for Rental Property Loans in Arizona are very similar from lender to lender.
Securing Rental Property Loans in Arizona is a bit more challenging than getting financed to purchase a home that you are going to make your primary residence. But the added obstacles are certainly worth the effort to create a passive stream of revenue to increase your personal wealth and secure your future. Understanding how to be an attractive borrower and meet lenders criteria for Rental Property Loans in Arizona can greatly reduce your stress level and increase the speed of your loan processing and approval.
Down payments are critical when purchasing a rental property or any investment property. There is no mortgage insurance on investment property loans so you will need to make a down payment of 20% or more to secure most rental property loans. But if you can make a larger down payment, that will work in your favor. You will have instant equity in the property and that will make lenders more eager to loan you the money that you are requesting. The equity represents great security for you and for the lender as well.
Credit scores are always important when seeking traditional financing. And borrowers can get a loan for a primary residence with a score as low as about 600. But investment property loans require a higher credit score to secure at a reasonable interest rate. A rate in the 700’s is certain to get a borrower a respectable interest rate and favorable loan terms. If your score is lower than 700, you might want to wait to invest in a rental property and focus on increasing your credit score by lowering your debt to income ratio and increasing your savings.
Cash reserves are always important when you are financing an investment property. The lender wants to know that you have accessible cash to cover mortgage payments in the case of a vacant property and no revenue coming in. The lender also wants to know that you can afford to make any needed repairs should issues arise. Without the reserve to cover unexpected repairs, the property could sit empty for months with no rental income, making it very difficult to pay the mortgage, taxes, and insurance.
Real Estate Investing Experience
Having experience in the real estate industry is also a big benefit for borrowers. Lenders want to know that a borrower understands all of the potential issues that can arise with a rental property or an investment property. Borrowers who understand these potential challenges will be prepared for them and will not fail to make mortgage payments or allow the property to fall into disrepair and become worthless as collateral on the loan. For new investors, it can be very helpful to create a business plan for the rental property and to submit that document to the lender with the loan application to demonstrate that you have a well thought out plan for managing the property and remaining profitable and successful.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.