general info on qualifying to purchase rental property

[crunching_numbers]

OK mortgage experts out there, how does preparing to buy a rental property differ from a regular mortgage on a 1st home? I am hoping to have myself positioned to buy an investment property within a year, but I am not sure what to do to be prepared. I know from things I have heard that the requirements are different. Is the potential rent of the property considered when they calculate things? Are down payments different? Required scores?

[Jazzzy]

I think you'll find it's a bit tougher to get a mortgage loan for an investment property than it is for an owner-occupied property.

The last one we bought a few years ago was $150k+, and we put $40k down in order to get a decent rate. We also did NOT want to be paying any mortgage insurance. Also, since this was a property that had not been rented in the past, they wouldn't count the monthly rent towards the payment. We had to show that we could make the payment without collecting rent. We also had $26k left on the mortgage for our own house, and they asked us to pay that off in order to meet ratios. So, we did.

I don't think things are this way for every lender. We live in a relatively small town, and we didn't shop mortgage lenders. We went to our local corner bank.

I would recommend that you sit down with two or three mortgage lenders to learn their requirements. You don't need to have them pull your credit at this time, but you can learn what they might be looking for.