• Record foreclosures could translate into good deals for real estate investors.nice real estate image by Denise Kappa from Fotolia.com
  
  Real estate investors are not typical homeowners who reside in the home. When an investor buys a property, the purchase is made solely for investment purposes. Investors typically rent the property and then sell it later at a higher price. Qualifying for a mortgage on an investment property has always been slightly tougher than qualifying for a mortgage on a personal property, because banks consider it as a higher risk. The mortgage rules for investment properties are different than those for personal properties.
  
  

High Down Payment

• In many cases, those seeking to buy personal property can get a mortgage with no or very little money down. However, when an investor purchases a property, most banks require the traditional 20 percent or more as a down payment. The reasoning for this is that banks consider a higher down payment an incentive for the investor to keep the property and for banks to avoid the loss that comes when investors walk away. The initial equity of 20 percent versus 5 percent makes it a less risky transaction for the bank.
  
  

Qualify For Fixed-Rate Terms

• Variable rate mortgages are not an option for investors; they must qualify for the fixed-rate mortgage terms and conditions. These include demonstrating the ability to pay for the property based on current income, and proving that debt payments are below 30 percent of total income. Although a homeowner might choose a lower interest rate on a variable mortgage, he must qualify for a fixed-rate mortgage for a minimum of 5 years to obtain the mortgage.
  
  

50 Percent Rental Add-Back

• Investors use rental income as part of the payment plan for investment properties. As of 2010, banks are allowing only a 50 percent add-back rule rather than 80 percent. Although it is possible that some investors will get more money from renters than the cost of the mortgage, banks are unwilling to risk the potential loss if renters end up paying less or the investors don't have renters. As a result, the maximum add-back considered by the bank for an investment property is 50 percent of the mortgage cost, requiring proof that investors can pay at least 50 percent of the cost out-of-pocket based on their current income.