by Susan Oberbillig, via LO Social Bot
Question: Can one get a mortgage on a home and immediately rent it out using the monthly payments of the tenants as the payment for the mortgage?
Yes. You would disclose to the lender that you are buying the property as a rental and apply for what is called non-owner occupied financing. Misleading them (saying you plan to live there) is a very bad idea—it is a form of fraud. So that you know. But it can be done correctly and might be a great option for you!
With a non-owner-occupied loan, the rate will be a tad higher than for an equivalent owner-occupied property, assuming you put the same amount down. You’ll probably also have a higher down payment. This is because lenders consider any loan on a rental property to present greater risk than for a personal residence, and smaller down payments present an even greater risk. That’s why they get the higher rate and down payment—to compensate for the increased risk.
Lenders will qualify you differently and have different requirements depending on whether or not you’re an experienced landlord (i.e. if you show rental income on past tax returns).
There might also be rental restrictions on the property itself. For example, some don’t allow tenant-occupied properties at all, and some limit the number of units that can be tenant-occupied. Be sure to check that before you think about making an offer on any condominium.
There is more to it so be sure to reach out to a trusted lending source for accurate information. Check out our Professional Directory for mortgage professionals that can assist you with learning more!
Hope this helps. Good luck!
