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CASH-OUT. REFIANANCE. PURCHASE.
Construction
Financing
Desinged exclusively for vacation rentals, our loan program ensures you get the best terms and support to maximize your investment success.
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Construction Financing Highlights
Practical Underwriting for Short-Term Rentals: Our approach ensures a logical evaluation of your vacation rental income
Extended 30-Year Terms: Enjoy long-term stability with fixed 30-year terms and no balloon payments
Transparent Pricing: Experience straightforward, negotiable-free pricing that you can trust
Asset Protection: Secure your personal identity and assets by borrowing through a corporate entity
Traditional Financing vs. Vacation Rental Property Loans
When securing financing for vacation rental properties, you can choose from various options, including standard mortgages provided by traditional financial institutions such as banks or credit unions. Let's start with the basic similiarities. For both investment property loans and conventional loans, you will fill out an application. The application likely will ask some different questions from the application you filled out when buying your home.
The lender likely will be less interested in your personal income, assets and employment history, but may want to know more about your investment expereince and strategy. your lender will pull your credit score. The lender will order an appraisal and open title.
So what are some of the important differences?
>36%
Debt-to-Income Ratio Requirement
Vacation Rental Property Loans
Understanding the different loan options for vacation properties is crucial for making an informed decision. Here are key financing options and their features.
DSCR Loans
Down payments typically are quite a bit larger on an investment property loan. You should plan on 25% (but this will vary and depend on your credit score), compare to the 3% often necessary for some government sponsored consumer mortages.
Buy-and-Hold Investing
Interest rates and fees typically are higher on an investment properly loans. You should expect them to be 100 to 400 basis higher than on a traditional mortagage. A basis point is a hundredth of a percent. So, if a conventional mortgage is 6.5%, an investment properly loan on the same properly to the same borrower would be 7.5% or more.
Hard Money Loans
You should expect to have to prove that you have liquid cash reserves equal to your down payment and closing costs plus 6-12 months of your monthly principal, interest, taxes, insurance, and any association dues. If you own more than one investment property, some lenders may require you to prove reserves on all of your financed investment properties. A conventional mortgage, on the other hand, require anywhere from 0-6 months of reserves.
Less Personal Documentation
For a traditional mortgage, lenders usually request detailed information about your employment history and personal income, including pay stubs and tax returns. Right before closing, they may ask you to confirm your employment status.
*For certain investment property mortgages, you may need to provide extensive documentation, especially if you own multiple properties. However, with some loan types, the lender will primarily assess the cash flow of the investment property rather than your personal financial details. This approach can significantly streamline the documentation process.
Qualifying for a Vacation Rental Home Loan
EDSCR has perfected the vacation rental loan process, facilitating substantial financing for investors aiming to build a robust rental income through vacation properties. Our qualification criteria are clear and straightforward, focusing on four key areas with seamless register processes, detailed instructions, and state-compliant solutions.
25%
Down Payment Requirements
"In general, you should expect to pay 25% down on a vacation rental, unless you have a very good FICO score, which may allow you to negotiate for only 20% down. Sometimes, lenders may request up to 35% if your credit score is lower than their expectations. With seamless register processes, clear instructions, and state-compliant financing solutions, securing the right rental property loan becomes more accessible.
Document Preparation
When applying for a vacation rental loan, you won’t need traditional financial documents like tax returns. Instead, you’ll need to provide key items such as a government-issued ID for each guarantor, a voided check, an insurance declaration page, and a title company contract. If you're borrowing through a business, include relevant business documents. You may also need to provide HOA contact information, current lender details for a cash-out refinance, and the purchase contract with any addendums.
Meeting Eligibility Criteria
Securing a loan for a vacation rental usually demands higher standards than for a primary residence. Ensure your property meets the minimum requirements of a $150,000 value, a $75,000 loan amount, and a credit score of at least 680. Additionally, you should not have had bankruptcies in the past four years or foreclosures in the last three years.
Ensuring Property Readiness
When financing a vacation rental, the property generally needs to be in rent-ready condition and meet a C4 classification. Significant renovation or construction costs typically require separate financing, such as construction loans, as they are not covered by the vacation rental loan. Construction loans offer funding for major renovations, new builds, or extensive property improvements. With seamless registration processes, clear instructions, and state-compliant solutions, investors can secure the right funding for their rental properties, whether it's a standard vacation rental loan or a specialized construction loan for more substantial projects.
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