More and more people in the US are turning to investment properties as a lucrative source of income. However, for first-time buyers, purchasing a rental property can be more complex than expected. This is especially true when it comes to obtaining the necessary financing, as securing a rental property mortgage is different from financing a primary residence. Lenders may be more hesitant to underwrite loans for rental properties, and buyers should be prepared to meet strict requirements before being approved for a mortgage.

Despite the initial challenges, it’s important to understand the legal definition of a rental property and the additional qualifications lenders will seek before granting a mortgage. By gaining this understanding, aspiring investors can overcome the daunting hurdles of purchasing a rental property and set themselves up for long-term financial success.

One important factor to keep in mind is that down payment requirements can vary from lender to lender. Generally, most lenders will require a down payment of 15 to 20% for a single-family investment home. However, if you want to purchase a duplex or quadplex, you must put at least 25% down.

To secure an investment property loan in Florida, you’ll need to partner with a bank, credit union, or mortgage lender. It’s important to note that lenders have fairly strict eligibility requirements for investment property loans. To qualify, you’ll need good credit, a low debt-to-income ratio, and enough cash for a down payment.

Interest rates for investment property mortgages are typically higher than for mortgages on primary residences, usually around 0.25 to 0.75% higher. This is because lenders view investment property loans as being riskier than primary mortgages since borrowers are more likely to default on investment properties.

While it’s possible to receive 100% financing for an investment property in Florida through a VA multifamily loan if you’re an eligible veteran, this option is not available to everyone. Another zero-money-down option is a HELOC loan, which allows you to tap the equity in your current home and use it as collateral for another mortgage. However, keep in mind that HELOC loans can also come with higher interest rates and other associated fees. It’s important to carefully consider your options and work with a knowledgeable mortgage advisor to find the right investment property loan for your needs.