The housing market is a lucrative business, which is why many investors want to dip their toes in real estate. While real estate property provides long-term financial rewards and a high return on investment, financing it can be tricky. This is because there are various types of lenders, and each of them can have unique requirements different than those for primary homes.
Whether you are investing in a house or apartment, you should come up with excellent financing techniques. Here are some investment property financing strategies:
1. Request for Owner Financing
Almost anyone could qualify for a loan. Because of this, many sellers are suspicious of potential buyers. To prove that you are a responsible investor and credible borrower, consider requesting owner financing. This option lets sellers finance the purchase for the buyer.
If you decide to go this route, create a plan to prove that you are serious about the transaction. When requesting owner financing, indicate the amount of money and terms.
2. Make a Large Down Payment
Remember that mortgage insurance won’t cover real estate investment properties. For this reason, make sure you can afford to put at least a 20 percent down payment before securing a traditional financing option from a lender. Aim to put down a 25 percent down payment for a powerful incentive or a better interest rate. On the other hand, try to get a second mortgage if you don’t have the down payment money.
3. Be an Attractive Borrower
Become an attractive applicant in the lenders’ eyes by paying down existing debt and improving your credit score before securing a deal. Do this by paying off or reducing credit card debt, student loans, or car loans significantly.
If your score is below 740, you will be charged additional money to keep the same rate. This fee ranges from one-quarter of a point to two points. Additionally, a point is equal to one percent of the loan. Besides paying points, consider accepting a higher interest rate if your credit score is below 740.
4. Choose Local Lenders
Instead of heading to a large financial institution, go to local investor lenders for financing. They tend to offer more flexibility, especially if you are unable to make a sizeable down payment. Additionally, they may be more knowledgeable about the local market.
Reaching out to mortgage brokers specializing in investment lending is a good alternative for national financial institutions. To pick the right one, do your research, particularly their background and work experience.
5. Apply with as Many Lenders as Possible
Don’t settle for just one mortgage and simply accept any terms you are given. When financing a property, apply with as many lenders as possible. This should include conventional and asset-based lenders. Doing this increases your chances of getting financing with the best terms and lowest interest rates.
Investing in real estate allows you to reap financial rewards and even achieve financial security. After deciding to add real estate to your investment portfolio and finding the perfect investment property, proceed to choose the right financing option. Get the best possible loan for your investment property by reaching out to us.
At DFW Investor Lending, LLC, we offer investment lending in Fort Worth and nearby areas. We can help achieve your home investment goals by offering loan programs with fair interest rates. Contact us today at (214) 382-2676!