IAre lenders more strict in approving people for rental property?
Yes. but, appropriately so.
1. If you are a non-owner occupant loan applicant, the lender will be LESS strict on caring how close the rental property is to your workplace.
- Claiming to be owner occupant of a smaller, cheaper home that the one you now enjoy inn Concord while working in the bay area is a hard sell to a cautious underwriter.
Do I need to even inform them, cause how will they later that the house will be a rental property? Of course you have to answer the questions on the application correctly to the best of your knowledge belief and intent. Don't venture into the slippery slope of fraudulent behavior.
If you think that it is 95% likely quickly turn it in to a rental, that you will live in the home for less than a year, soon after purchasing; and only 5% likely that you will live there long term, then the right thing to do is pretty obvious: tell the truth, yo do not INTEND to occupy.
Will I have to pay a higher deposit? Yes, the benchmark down payment these days is 25%. You could pay additional interest expense and get a lower down payment. I don't advise it. That is pretty good. With 25% down you get leverage of 3 to 1. and could have a positive cash flow on most rental properties even in today's rising real estate investment market.
Three-to-one Leverage means that if property value increases by a modest 3% per year, the 3-1 leverage increase the appreciation only return on your $25,000 investment to $12,000 Add the value of appreciation to the positive cash flow, favorable IRS tax treatments, equity growth due to principal reduction of the loan balance from monthly payments, you could have a total return on investment of over 50%.
The numbers usually are not as good if you put less than 25% down or if you put more than 50% down.*
Each highlighted opportunity property should be analysed on its own merits, since every property is unique, though many are similar.
*The opportunity to buy cash for a quicker close and lower price and the funds saved on not paying loan costs, make a cash purchase sensible too.