General requirements for obtaining home investment loan

[DeVonte Jones]

Hi,

I am actively trying to purchase my first investment property.

Are there general requirements for obtaining a loan? - (ie. Certain credit score, cash on hand for down payment, etc)

[Jeffrey L.]

Hi @DeVonte Jones, I think the first thing you should consider is whether to purchase & finance your investment property under your personal name or a legal entity (e.g. under a LLC).

If personal, lenders will underwrite based more on your personal financial situation, 20% down payment, Loan To Value (LTV) ratio, Debt Ratio are some of the things they pay attention on. If you are not a seasoned rental investor (e.g. showing 2 years of rental income on your tax returns), they may not even count your "forecasted" rental income, which can make your debt ratio higher and harder to qualify.

If LLC, lenders will underwrite based more on the investment's performance, 25%-30% down payment, Debt Service Coverage Ratio (DSCR), occupancy ratio are some of the things they look at first. Your personal financial situation becomes less relevant to them.

Jeff