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Types of Investment Property Financing

house-field-cloudyFrom about 2009 – 2012, investment property financing was a much larger portion of our overall production.

As the market heated up, however, many investors dropped out of the market.

Lately though we have been getting the occasional inquiry, so I thought it was time to discuss the options again.

Fannie and Freddie will finance investment properties with as little as 15% down, but the less buyers put down, the higher the rate.

25% down is usually the best option, as it garners the best rate.

The main thing to remember is that rates are much higher for investment properties than they are for owner-occupied properties.

INVESTMENT PROPERTY RATES & TYPES

Below are approximate “rule-of-thumb” rate adjustments for investment property financing, depending on down payment percentages.

25% Down:         1/2% Higher Rate (relative to owner-occupied financing)

20% Down:        3/4% Higher Rate (relative to owner-occupied financing)

15% Down:         1% Higher Rate (relative to owner-occupied financing)

CONDOS: B/c many investors buy condos, there are two other considerations to keep in mind for condos: (1) interest rates for condos are an additional 1/4% to 3/8% higher than interest rates for single family homes, with down payments of 25% or less; and (2) Condo complexes must be over 50% Owner-Occupied before Fannie and Freddie will finance an investment unit.

JUMBO: Jumbo financing options for investors are very limited with large down payment requirements (25% or more) and high interest rates.

MULTI-UNITS: Two to four unit financing also requires much larger down payments (25% or more) with large rate adjustments as well.

Jay Voorhees
Founder/Broker | JVM Lending
(925) 855-4491 | DRE# 01524255, NMLS# 335646