For the best rates from A lenders, a credit score of 680 or above is the gold standard. However, if your score is lower, alternative lenders offer programs specifically for lower credit scores, and an income property mortgage broker can guide you toward those options and coach you on improving your score for better terms down the road.
Your down payment does not have to come entirely from your savings. Some lenders allow you to use a gifted down payment in addition to your savings, and some lenders allow you to use a portion from an unsecured line of credit. The key is to plan your down payment in advance with a broker so there are no surprises during the deal.
Focusing on the lowest rate can be the most expensive mistake you can make because it is often bait attached to a restrictive product that blocks your growth. Additionally, the bank offering the lowest rate might only allow you to finance two or three more properties, cutting you off when you are gaining momentum, or they may lend on the lower of the purchase price and appraised value, trapping your equity.
Every lender treats rental income differently. Some lenders may take only 50% of your rental income for the mortgage application, some may take 80%, and some may take 100%. However, lenders using 100% of the rental income may be stricter on other fronts, requiring extensive paperwork or charging a higher interest rate, so the right fit depends on your overall strategy.
Your decision to hold the property in your personal name or a corporation impacts the type of financing you get, your rate, and which lender you work with. You should have your accountant speak with your income property mortgage broker before firming up your offer to discuss the tax and financing implications of each structure.
