October 8, 2014

Real Estate Financing Tips and Guidelines

Consider there are small improvements in the economy; some investors are considering the residential real estate market once again. The lowering of prices and fluctuations may be a good time to do so, but the choice has to be made carefully and with a solid plan if you want to succeed in your business efforts. The following tips will give you a few ideas you can make use of as your long term solutions:

Real Estate Financing Tips and Guidelines
• Have a good down payment

Mortgage insurance will likely not cover investment properties, so you will need to have at least 20% down payments to ensure financing for any of them. If you can get to 25%, then you will have the chance to qualify for an even better overall interest rate. If you don't have the down payment, then you will be able to go for obtaining another mortgage on the property, but that will be even more difficult and risky. This is a pretty rare occurrence however so don't count on it, as these are usually used for properties for financing more than $400,000 and up.

• Borrowing strong

Although there are many factors to deal with, such as the loan-to-value ratio of what you work with and the policies laid down by the lender, you can still influence how things turn out with investment properties. Above all you need to check your credit score before you start a deal, as it will have a serious impact on the terms of the loan ahead. If you have a score of below 740, then you will feel the sting of losing more money to the interest rate. Below that you will have to pay more to have your interest rate stay on the same level, so you will either face that or a higher interest rate. In situations like these any reserves in the bank for no less than six months may also become a part of your lending equation. If you have multiple properties, you will also likely have to have a separate reserve for each one of them.

• Keeping away from big banks

If you want to have a down payment that is not as big as it might be under extenuating circumstances, then you will have to consider going to a local bank for financing, rather than the large behemoths of financing out there. They will allow for more flexibility, plus you may have the local market on your side for local investing. Mortgage brokers will also be a decent option if you want to have a wider access to more than a few loan products. Do some much needed research before embarking on that task. You will need a veteran on the market if you want to get the best possible outcome from your work.

• Owner financing

Requesting owner financing often used to make sellers suspicious of their potential clients, but mostly because once almost anyone could get a bank loan. Nowadays they are more accepting to it all due to to credit crunch and greater number of sellers, but you should still have a good plan ahead of you. You have to be certain about the amount of money you want to deal with and you need to be able to sell your idea to the seller to have any success in the end.
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