Mortgages and the purchase of investment property

[scottish007]

For a new guy, can you help answer the following question as it relates to the purchase of an investment property (single family home):

When I contact a lender to arrange a mortgage, before I discuss rates and terms, do I need to disclose upfront that I will use the proceeds to purchase an investment property? If so, what questions should I be prepared to answer? (Obviously, I need to know the monthly rental projections)

Silly question, but my limited real estate knowledge is based on the UK market.

Bear with me, I am still learning

[BuyHawkeye]

Yes. You are correct. Tell the broker that you are buying an investment property. You can/will find advice contrary to what I just stated (and you can even get away with it). Just understand that you will be committing mortgage fraud if you intentionally lie (felony offense).

I believe from a previous post that you mentioned you are in Georgia? Well, welcome to one of the top fraud states! We stay in the top five fairly consistently. As a result, brokers are under a microscope and the tolerance is very low.

In the end, do the right thing and you won't take as big a hit on interest rate as you might suspect. And as I tell my investors, if you can't tolerate that bump in rate it probably isn't much of an investment to begin with...

Hope this helps.

[scottish007]

Thanks BuyHawkeye, you are certainly reviewing and answering my posts on a regular basis! Thank you!

Thanks for the confirmation, I believe that I should have worded my question a little differently. "Disclose" does sound like I planned on being less than forthcoming. Certainly not the case.

Actually, what I meant to say was, do I call the mortgage broker and say, "Hi, I want to buy an investment property, can you help?" versus "I want to buy a property, can you arrange a mortgage"

Clearly, more information is appropriate, ethical and the legal think to do. Consider it done!

Great advice again, thanks for the reply!

[BuyHawkeye]

Oh no. I wasn't being accusatory (at least not intentionally). It is just that I hear these questions daily.

A) I'm a mortgage broker
B) I'm an investor

So guess what I do a lot of?

You are on the right track.

[scottish007]

Oh no. I wasn't being accusatory (at least not intentionally). It is just that I hear these questions daily.

A) I'm a mortgage broker
B) I'm an investor

So guess what I do a lot of?

You are on the right track.

No harm, no foul

I realized my initial post was badly written. Advice duly noted and much appreciated!

[Saodavi]

Actually, what I meant to say was, do I call the mortgage broker and say, "Hi, I want to buy an investment property, can you help?" versus "I want to buy a property, can you arrange a mortgage"

Yes, you tell the mortgage broker up front that you are searching for an investment property. Rates, down-payments, qualifying ratios and other terms are different for investment properties than owner occupied properties.

You will get farther, faster by giving your LO this information upfront. That way he can get straight to work on a loan for your particular scenario.

Also, if your property is sufficiently far from your current home (50 miles+) it may qualify for a "vacation property" which would get you some better rates. I'm not sure about the ethics/legality of something like that but our LO offered that to us as a solution.

FWIW, out-of-town landlording is usually considered a very bad idea. It's generally not recommended that people invest outside of their local market.

[scottish007]

Yes, you tell the mortgage broker up front that you are searching for an investment property. Rates, down-payments, qualifying ratios and other terms are different for investment properties than owner occupied properties.

You will get farther, faster by giving your LO this information upfront. That way he can get straight to work on a loan for your particular scenario.

Also, if your property is sufficiently far from your current home (50 miles+) it may qualify for a "vacation property" which would get you some better rates. I'm not sure about the ethics/legality of something like that but our LO offered that to us as a solution.

FWIW, out-of-town landlording is usually considered a very bad idea. It's generally not recommended that people invest outside of their local market.

Good feedback! Much appreciated. Re landlording, I agree. I will be using a property management firm for all out of town properties, including my properties abroad. Again, thank you for taking the time to respond. I was unaware there was such a thing as a vacation property loan. However, it may, or may not be appropriate as I may not use as a vacation property. Not sure yet.....

[avonreal]

there are lenders that speciallise is investment mortgages, you might be able to get a good rate if you have a decent credit rating.

[SEO Nick]

Uh... 2cents... can you please remove all but 3 links from your signature? We only allow 3.