How to finance a rental property

The demand for rental housing has been increasing for decades. What does the path to owning a rental property look like, and what are the loan options?

Consider a rental property if you are looking to expand your real estate holdings. The renter is helping you pay off the mortgage, upping your equity in the property until you own it outright. At that point, the property starts generating revenue for you.

There are challenges to being a landlord. We will identify the common pain points, and how Lyons helps its’ customers overcome them.

Like with your primary home, it is important to stay within your budget. This will help when the inevitable fixes and costs associated with the property come up. Market volatility can get in the way of seeing immediate returns on your investment. Positioning yourself to withstand setbacks will allow you to realize this powerful investment opportunity.

Getting qualified for a mortgage for rental properties is challenging, but not impossible.

Lenders look at rental property mortgages as riskier than loans on primary homes. In turn, lenders have stricter requirements for rental properties. The process itself is comparable to getting financing for an owner-occupied property. Like when you got your home loan, you will supply documentation on your income, assets, employment, and debt obligations. The lender will check credit scores as well.

Lyons Mortgage makes qualifying easier by providing a variety of loan options.

The solutions Lyons provides are custom fit to your circumstances. We can help you reach your goal even if you don’t qualify for a conventional mortgage. We have non-conventional options that use the rental income of the property to help applicants qualify. Lyons’ experienced professionals who can look at the cash flow of the property and use 100% of that income to cover the principal, interest, taxes, and insurance. Lyons’ does not deduct any expense from the gross rental income of the property. If you have a lot of cash reserves and assets, these options can help you qualify if there is concern about your yearly income.

Call us today to learn about our non-conventional product options. We want to help you get your dream investment property!

Down payment requirements

To get a loan on an owner-occupied property, borrowers can make a down payment of as little as 3%. For rental properties, expect to pay at least 20% of the loan amount for a down payment. This can be lower but expect a higher interest rate in return.

Speaking of interest rates…

Interest rates are higher than for owner-occupied properties.

A loan on a non-occupied property is a riskier lending proposition than on a home the borrower plans to live in. This risk gets factored into the interest rate.

Conventional mortgages usually have the best interest rates on rental property financing. If you have a credit score above 740 and can meet the down payment requirements, this may be the best option for you.

What if my credit score isn’t great?

Having a good credit score will always help you score the most favorable loan terms. This is especially true for rental property financing. You can still become the owner of a rental property even if your credit isn’t up to the requirements of a conventional mortgage. The non-conventional products Lyons’ offers are to help those with less than perfect credit achieve their financial goals.


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