Residential Rental Property Loans - Making An Investment In Your House

A rental property loan, also known as an owner-occupied loan, is a secured first lien loan. To qualify, the occupied property must be let to a tenant, not an occupant who has lived in the home-since the taking out of a lien-only contract. Typically, however, short-term rental properties are used, and often the rental property is only used for a short time, such as vacation rentals or short-term leases. However, this kind of loan is ideal for investors looking to purchase properties in areas where there is no rental property available, since the owner will have the security of a first-lien mortgage.

Rental property loans typically have much higher interest rates than traditional mortgage loans. This is because, in addition to the lender needing to recoup the loss of principal, they also need to collect the following: cash paid to escrow (paying the outstanding balance of the loan in advance); property taxes; appraised value; lender's application fee and other miscellaneous fees. In some cases, depending on the type of loan, some or all of these may be removed from the final price, thus saving the lender additional money. See more here...

There are several ways in which rental property loans can benefit investors. First, the higher interest rates help to lower monthly payments, which in turn allow borrowers to save money each month. Second, if the property does not need to be rented out, there is no collateral securing it and therefore lower interest rates are likely. Finally, many borrowers use the funds for other investments, like vacation trips and retirement funds. The Reserve Requirements, or the minimum required down payment and closing cost requirements, typically apply to conventional mortgages.

When comparing mortgage rates for rental property loans, be sure to consider the time span you plan to invest in the home. Standard interest rates are based on a 30-year term, but the longer the term, the more you will typically pay in interest. For properties that are less than five years old, the interest rates are typically frozen at this time. For newly purchased homes and rental properties, however, your interest rates are likely to increase with time, especially if the property is expected to appreciate quickly.

One thing to keep in mind is that when you obtain one of these types of mortgage loans, there are usually other obligations you must meet. These usually include the payment of closing costs and/or fees. As stated above, the lender is usually required to hold the title to your residence until the loan has been paid in full. At that point, the homeowner is considered to be the legal owner of the residence. If the borrower does not have enough money in the bank to fulfill the loan requirements, the lender may sell your residence to satisfy the requirements. Be sure to read all of the fine print before signing any type of rental property loans agreement. Learn more how to get a loan to flip a house.

If you are interested in making an investment, you may want to think about obtaining one or more of the residential rental property loans that are available to you. With the right financing and a sound strategy, you can make a nice return on your investment and benefit from an increase in cash flow. Your strategy should include a good return expectations, adequate credit scores and a realistic evaluation of the market value of your investment.

Look here for added details: https://en.wikipedia.org/wiki/Real_estate_investing