Getting an investment property loan from a credit union can be a great way to finance real estate investments. Credit unions typically offer lower interest rates and fees compared to big banks. However, interest rates and terms vary significantly between credit unions. Doing thorough research and shopping around is crucial to find the best rate. This article will provide key information and insights on getting the most competitive interest rates for credit union investment property loans.
Compare rates across multiple credit unions
When applying for an investment property loan, interest rates can vary greatly between different credit unions. Some factors that influence rates include the applicant’s credit score, loan-to-value ratio, debt-to-income ratio, and the overall competitiveness of the credit union. Given the variability, it’s essential to research and apply with multiple credit unions to compare interest rates. Online credit union rate comparison tools can streamline this process.
Optimize your credit score
In most cases, the higher your credit score, the lower the interest rate a credit union will offer on an investment property loan. Some ways to optimize your credit score before applying include paying down revolving credit card balances, avoiding applying for new credit, and ensuring all payments are made on time. Aim for a credit score over 740 to get the most competitive rates.
Lower your debt-to-income ratio
Your debt-to-income (DTI) ratio also significantly impacts the interest rate on an investment property loan. Lenders look at your total monthly debt payments divided by gross monthly income. Reducing other debt obligations like credit cards, auto loans, and student loans can help lower your DTI ratio. A DTI under 36% is ideal for the lowest rates.
Increase your down payment amount
The higher your down payment, the lower the loan-to-value (LTV) ratio will be. Most credit unions offer their lowest interest rates when the LTV is 80% or less. Coming up with a 20% or higher down payment shows the credit union you are financially committed and can help secure a sub-4% interest rate.
Ask about rate discounts
Many credit unions offer interest rate discounts for existing members with accounts in good standing. Discounts are also sometimes available for setting up automatic loan payments. Be sure to inquire with the credit union about any potential rate discounts that may apply to your situation.
Getting competitive interest rates on credit union investment property loans requires thorough research across multiple lenders, optimizing your credit score and financial ratios, coming up with a sufficient down payment, and asking about available discounts. Putting in this effort can save thousands of dollars in interest costs over the life of the loan.