Pa Residential Property Investment Loans
Pa Residential loans are designed for properties that provide housing for individuals or families and contain four units or less on the property. These loans more closely follow a typical Pa home mortgage, with similar qualifying standards and processes. These standards include:
Pa Investment Property Loan Guidelines
Debt to Income: Your debt to income ratio is a number used by Pa lenders to determine your ability to pay a certain debt based on how much income you make, typically in a given month. If you have $2000 per month in monthly debts on your credit report, but have an income of $6000 per month – your debt to income would be 33.33%. Debt to income can get a little more complicated than that as well, so for much more thorough information, give us a call and we can help calculate it for you.
§ Credit Score: Your credit score is a numerical number applied by three different “credit reporting agencies” and is designed to tell inquirers how you handle credit. On a scale from 300 to 850, you will typically need to have a minimum of 700 to obtain a investment property loan.
Loan to Value: The loan to value is another ratio, used by lenders to discover their risk on the property based on how much equity they have in the property if they had to foreclose. The loan to value, as the name suggests, is determined by comparing at the total loan amount to the total fair market value of the property. In the height of the last real estate bubble, many Pa lenders were allowing a borrower to take a loan up to 125% of the value, but today, 70-80% is much more likely on investment properties.
Landlord Experience: While previous landlord experience is not a requirement to obtain an investment property loan, it can affect your ability to qualify for a loan. You see, as you attempt to obtain multiple loans for investment properties, your debt to income ratio climbs very quickly, even though that debt is being paid by a tenant. To help increase your income, a bank can add your rental income to your regular monthly income but usually will only do so after you have been a property investor for more than two years – though this requirement can differ greatly between lenders. Keep in mind also – that even with landlord experience, a Pa lender or broker will typically only apply 70-80% of that rental amount toward your income, to protect themselves against losses.
Typically, Pennsylvania residential investment loans will extend for up to thirty years and the rate is generally some of the lowest rates you can find, usually between .5% and 1% higher than you’ll obtain for a typical Pa home mortgage.