We talk to many people who are interested in investing in real estate by purchasing a house or a condo or even a multi-unit home with the idea to rent the property and generate income and build equity. They often are not sure if they qualify for a mortgage to purchase a rental property or what the requirements are, especially if they already have a mortgage.
The short answer is that if you can qualify for the mortgage you already have then it is likely you will qualify for a mortgage on an investment property. This is because you can count a portion of the anticipated rental income as income for qualification purposes. This income can be used to offset the monthly mortgage payment and expenses and allow most people to qualify for a mortgage on an investment property.
The second most common question is revolves around the down payment and amount of assets required to obtain a mortgage on a second property. Generally, a down payment of 20% is required in addition of having enough assets in reserve to cover 6 payments in an emergency. Both 401k accounts and IRA accounts can typically be counted as assets in reserve.
We have had many clients use the equity on their current house (by refinancing) to finance the down payment needed to purchase an investment property.
Qualifying for a mortgage on an investment property is very similar to qualifying for a mortgage on a primary residence and is no more complicated. We can assist with the analysis needed to determine if the numbers can work on an investment property.