Comparison

[Eric O'Hair]

My wife and I are really wanting to start buying rental properties.  We have great credit, and have a little over $700 /mo to invest.  I inquired on a loan through Teachers Credit Union since they are our regular bank and lender(HELC).  We initially thought a $35,000 house would be a good place to start.  However the real estate agent we are working with mentioned he could possibly get us a triplex for $70,000.  The mortgage specialist initially said 5% down is what we would need, that'd be easy.  Apparently there was some type of miscommunication and she thought it was for a primary residence.  To qualify for a investment property the guidelines seem very restrictive and I want to ask if these are normal guidelines.  If they aren't( I really hope they aren't), could I get some suggestions and tips on where to go, would a bank instead of a credit union be a better bet? Are loans like this normally this restrictive? 

Down payment requirement 30% (no gift of fund allowed)

Max term is 15 yr fixed – current rate today is 4.125%

Must escrow for both property taxes and insurance

Credit score over 700 + (this is not an issue)

Property must be located in Indiana

Debt Ratio needs to be at 40% or under

3 months reserves for principal, interest, taxes and insurance .

Thanks for your help Bigger Pockets family.

Eric

[Nuhan Demirkan]

Eric, some banks have their own overlays on top of the federal requirements. Your credit union looks like applying theirs thus limiting your options. I would suggest go to a mortgage broker and look into getting a regular conventional 30 yr fixed rate mortgage. You can have up to 4 mortgages like these before the rules change and 10 is the maximum. You can then go to portfolio lenders for commercial loans.

See below...

Down payment requirement 30% (no gift of fund allowed)

Usually this is 20%, money should be in your account for the past 2 months

Max term is 15 yr fixed – current rate today is 4.125%

30 yr fixed is the norm

Must escrow for both property taxes and insurance

This will be in your monthly payments to the bank

Credit score over 700 + (this is not an issue)

Property must be located in Indiana

Shouldn't be an issue with a national bank like Wells Fargo or Bank of America

Debt Ratio needs to be at 40% or under

Probably true

3 months reserves for principal, interest, taxes and insurance .

3 to 6 months reserve is standard