Unraveling Real Estate Investor Loans

by Gerry
(Sunnyvale, California, Santa Clara)

Unraveling Real Estate Investor Loans: Kate, My sister and I are inheriting my mom's house and I plan to buy my sister out at about $125,000. The house is worth $250,000.

Gerry continues... I have excellent credit and I’m a first time buyer at almost 60. About a year ago I was pre-approved for $400,000.

Where should I apply for a mortgage with the best interest rate? I will be turning the house into a rental. The house is in Haverstraw, New York (Rockland County) and I live in California.

My questions are:

1. What advantages do I have as a first time buyer?


2. Will my age help to get a lower interest rate?


3. For a mortgage one-half the price of the house, do I need to provide a down payment?


4. What do I need to do to get the lowest possible interest rate?


5. Should I use PMI or insure separately?

Thanks for your help.

Kate Answers: Unraveling Real Estate Investor Loans

Dear Gerry,

Before I attempt to unravel the mysteries of the investor loan, I want to tell you how excited I am for you.

Rental property with 50% equity usually cash flows and produces income. Congratulations!

First Time Home Buyers & Real Estate Investor Loans

What advantages do I have as a first time buyer?

Historically, the majority of first time home buyer programs have been for owner occupied properties. I am not aware of special financing for rental property except for the FNMA HomePath program. But this special financing is reserved for properties in Fannie Mae's foreclosure portfolio.

However, it won't take more than a half hour to browse the New York .gov website for local mortgage programs benefiting first time home buyers or properties within a certain zip code.

Age & Real Estate Investor Loans

Will my age help to get a lower interest rate?

How old you are shouldn't factor into loan approval, as long as you are of the contractual age of 18.

There was a major bank in the 90's who got their hand slapped for denying loans to anyone over 70, stating "It is unlikely the loan will be paid back." The government did not take to that kindly.

So check your birth certificate and as long as you were born before 1992, you should be in the clear. :)

Equity & Real Estate Investor Loans

For a mortgage one-half the price of the house, do I need to provide a down payment?

You will need to ask your mortgage company if this real estate transaction will be considered a refinance or a purchase. Generally speaking, the loan-to-value ratio for a refinance is based on the appraised value.

However for a home buyer, the percentage of down payment is based on purchase price or appraised value, whichever is less.

Best Mortgage Rates & Real Estate Investor Loans

What do I need to do to get the lowest possible interest rate?

Approvals with the best mortgage rates are based on excellent credit, adequate income, manageable debt and sufficient appraised value. But even with the most qualified borrowers, home loan transactions can be tricky. Here's how to overcome mortgage approval hiccups.

Understanding mortgage closing costs and following smart procedures for locking in your interest rate are crucial to getting your best mortgage rate.

In fact, just check in here to see the grief that occurs over mismanaged rate locks at Ask Kate's Mortgage Rate Lock Unzipped At Last. But good news, if you read through my mortgage rate lock series, you can avoid this heartache and get your best mortgage rate.

PMI Private Mortgage Insurance & Real Estate Investor Loans

Should I use PMI or insure separately?

Okay, definition time! PMI stands for private mortgage insurance and is required by the bank when the down payment or equity is less than 20% as discussed earlier.

Whether or not you want PMI is not in question. If required, the mortgage company will order it as they are the true client of the MI company.

You should know more about PMI before you apply for your mortgage. Start at What Is PMI to become an expert! In addition, here is a recent question from a homeowner in Florida, How Can I Cancel PMI.

Gerry, one more thing. I'd like to hear back from you. Let me know if this page is helpful to you. Anyone can Comment on Unraveling Real Estate Investor Loans. Or Ask Kate another question here.

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Have You Seen The Most Recent Ask Kate Answers

• How Can I Cancel PMI
• 3 Ways To Compare Mortgage Lender Rates
• Adjustable Rate Home Mortgage For Seniors

Best wishes,

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