Financing Rental Property

Q: I am a 33-year-old female seeking to increase my wealth through real estate investing. I have great credit but little money to put down. I do not want to take money out of my current home. I read an article where a person received 100% financing for an investment property through a first-time investor program. Where can I find these types of programs or loans?
— L. Smalls, Via the Internet

A: Obtaining 100% financing for investment properties is not easy, because lenders see such loans as risky. In fact, since it is considered a commercial purchase, many lenders insist on 20% to 30% down and significant cash reserves for investment property loans. And the credit score requirements are generally higher as well — 680 and above. Each lender has different criteria for investment property loans.

You can obtain 100% financing for a one- to four- unit rental property from most lenders but not as a straight investment property. You would qualify under conventional owner-occupied provisions, whereby you agree to live in the building for a set period of time in exchange for a more favorable loan agreement. In some cases, you’ll receive an 80/20 loan, which requires a first and second mortgage loan as a way of avoiding the cost of private mortgage insurance (The first loan covers 80% of the total amount financed and the second mortgage the other 20%).