As I have mentioned elsewhere, purchasing a duplex, triplex, or fourplex can be a beneficial means of getting started building a real estate portfolio, especially for the young professional.
One of the greatest hurdles in purchasing a fourplex is financing the purchase. Since the real estate bubble and the passage of the Dodd-Frank Act, obtaining a residential mortgage has become a much more rigorous process. It is important that potential investors work with a qualified mortgage professional to obtain prequalification early.
Here are some important items that an investor should know when considering the financing a fourplex in California. For help, I reached out to James Frazier & Robert Sinohue from California Mortgage Advisors.
Loan-to-Value (LTV)
The loan-to-value ratio (LTV) is an important factor in determining a property’s financing. This ratio is calculated by dividing the loan amount by the value of the property. Lenders use this to make sure that there is adequate security in the property should they have to seek repayment through the ownership and sale of the property.
LTV ratios are much more restrictive on investment properties than for owner-occupied properties. The maximum LTV varies by [Read more…]