Frequently Asked Questions
What is a pre-payment penalty?
A pre-payment penalty is a fee lenders charge if you pay off your loan early, such as refinancing or making extra payments. It helps lenders recover lost interest. Not all loans have this penalty, so check your loan terms to avoid surprises.
Do I need an appraisal?
You typically need an appraisal when buying, selling, or refinancing a home, as lenders use it to verify the property’s value. However, some refinancing programs or cash purchases may not require one. Always check with your lender or real estate professional to confirm.
What is ARV? (After Renovation Value)
ARV, or After Renovation Value, is the estimated market value of a property after renovations. It’s crucial for real estate investors and lenders to assess profitability and loan amounts. ARV is calculated by comparing similar properties and evaluating the impact of planned upgrades.
What is a Fix N Flip Loan?
A fix and flip loan is a short-term loan for real estate investors to buy, renovate, and sell properties for profit. It covers the purchase price and renovation costs, with repayment due after the property is sold. These loans are ideal for house flippers due to their fast approval and flexible terms.
How does the IRS define an investment property?
The IRS defines an investment property as real estate purchased to generate income, profit, or appreciation, not for personal use. Rental income is taxable, but expenses like repairs and depreciation are deductible. Selling the property may trigger capital gains tax, though strategies like a 1031 exchange can defer taxes.
How many investment properties can I own?
There’s no legal limit to how many investment properties you can own. However, financing, debt-to-income ratio, and cash flow management are key factors. Most conventional lenders allow 4–10 mortgages, but portfolio or commercial loans can help you scale further.
How do I get a mortgage with no personal income?
You can qualify for a mortgage without personal income by using rental income, assets, business income, or a co-signer. Lenders may also accept non-traditional income like alimony or disability benefits. Programs like asset depletion loans or government-backed loans offer additional flexibility.
Can I get a fixed interest rate?
Yes, fixed interest rates are available for both home loans and commercial renovation loans. They provide predictable payments and protect against rising rates, making them ideal for long-term projects. To secure the best fixed rate, compare lenders, check your credit score, and consider locking your rate during the application process.
What is the minimum credit score for an investment loan?
The minimum credit score for an investment loan typically ranges from 620–680, depending on the lender and loan type.