Many people may think that owning their first rental property is far in their future. However, with the expanse of products and the dedication of Velocity Lending, this can become a reality more easily than you thought! We’re here to help you build wealth.
The simplest way to get a rental property is to “Move Up” and turn your current home into a rental property. To do this, you must qualify for a new primary home. You will need to show employment history for the past two full years, or if you’re self-employed, you’ll be asked to provide your last two years of tax returns. Your credit will also be pulled, to determine your credit score and assess the debts you are responsible for. To get the best rate for your new home loan, your credit score should be at least 740. However, Velocity Lending can help borrowers with credit scores down to 600. Your mortgage broker will ask about your assets as well, like how much money you have in your accounts, and where the down payment funds will be coming from. These funds could come from your bank accounts, your retirement accounts, a gift from an immediate family member, or a HELOC on your current home. You can expect to put a minimum of 5% down on your new purchase.
The next step in the process is to start shopping for a new home! Since you will be “Moving Up” you need to find a home that is bigger, nicer, etc… Your trusted, local real estate agent will be a huge asset in helping you find this perfect property. While you’re looking for homes, you will want to get a full year lease in place for the home you will be vacating, and deposit a check for the lease prior to closing.
When you go under contract on your new home, we will submit your executed lease paperwork as well as a bank statement showing the funds towards the lease deposited, and they will be able to write off 75% of the tenant’s monthly payment from your debt-to-income ratio. To give some numbers to the situation, if your current mortgage is $1,750 and you charge your tenant $2,000 for their monthly rent, you will only be liable on your debt-to-income ratio for $250 for that mortgage.
There are huge benefits to owning a home, especially when you can own more than one. The appreciation of the home’s value will build over time. To give perspective on this, we historically are looking at 6 percent appreciation on residential real estate. On a $350,000 home, in one year, you would’ve gained $21,000 in equity. That’s what makes now (and truly, any time) the perfect time to jump in and gain some of that appreciation on both your current and your new home. Another added benefit is the cash flow that comes from the rental property. These profits will vary depending on many factors, but if you take the time and work with the right real estate team, you should be able to have some money in your bank account specifically from that rental property at the end of the year.
The final and most important piece of ease in owning a rental property is working with the right people. When you choose a trusted, local mortgage broker, they are going to educate you on the best ways to build wealth in real estate. They are going to make sure that you are in the best situation with the right loan and the right pricing for your financing. They are going to work with you long-term to help you continue to achieve your goals, no matter what it takes. The Velocity Lending team is going to make sure that the deal gets done with speed, excellence, and unbeatable customer service each and every time you trust us with your home financing. We’re available 60+ hours a week and always happy to answer your questions or run numbers on your potential new home. We are here for you!