Long-Term Rental Loans

What Are Long-Term Rental Loans?

Long-term rental loans are mortgages used to finance residential investment properties rented out for extended periods. These loan types should be differentiated from short-term rental loans, which are geared more toward vacation properties rented out for much shorter periods, usually on a nightly or weekly basis.

In particular, long-term rental loans are designed for buy-and-hold investors who generate steady rental income from tenants and build equity and wealth over time.

How to Qualify

While requirements vary by lender, here’s what you’ll typically need:

• Credit Score: Most lenders require a minimum score of 620+. Higher scores unlock better rates and terms.
• Down Payment: For investment properties, expect to put down 20% to 25%. Some lenders may allow lower down payments with mortgage insurance.
• Rental Income: Depending on the specifics of your loan, you may have to show the lender proof that the property generates enough income to cover the mortgage.
• Property Condition: The property must be rent-ready and not require any major repairs. Some lenders may require an appraisal or inspection.
• Entity Structure: Many lenders allow you to borrow under an LLC or corporation.