Everything New Investors Must Know About Real Estate Financing

While many experienced real estate investors can easily parlay one transaction to another and collect enough funds to pay for their homes. New real estate investors in training often need help financing their first purchase. A mortgage for real estate investment is, in some ways, quite similar to other real estate loans. However, here, the lender will distinguish loan qualifications and programs. All investment in residential and commercial real estate financing options that offer loans to borrowers who plan on buying and selling. The properties are considered riskier than loans for owner-occupants. 

This is because all lenders believe that if a borrower faces any financial issue. They are more likely to prioritize the payment on their home and let the investment property loan default. This additional risk associated with an investment property loan means that a lender will expect their borrowers to have a sound credit score. The borrowers must also have a low debt-to-income ratio. And be willing to submit a significant down payment if they wish to qualify for an investment real estate loan. Most types of real estate finance require a total down payment of at least 20% in terms of investment properties, while some even ask you to put down 25%.

You Must Evaluate Your Investment Carefully.

As a real estate investor, you need to decide if you plan on flipping a property as soon as you are done making improvements. Or if you wish to keep it for rental income and let the real estate appreciate before you finally sell it. It is a critical choice that will drive every other aspect of your purchase. Experienced real estate investors from Real Estate Funding Solutions can help you determine if your local real estate values. They can evaluate if situations are reasonable and if prices are rising fast enough for you to invest. You must always consider professional advice to ensure you can make a quick and sound profit on your next real estate purchase. In the case of more stable markets, you will be better off with a long-term investment property. You must also factor in the total cost of maintaining and managing your investment property. And the demand for rental real estate in your area. We also suggest all new real estate investors be ready for a gap of a few months before they find the right tenant. 

Types of Real Estate Financing for Investors

If you want to keep your real estate as a rental property, you will probably be more interested in a fixed-rate home loan, so your payments are always the same. By estimating your monthly rental income, you can easily decide if the payments on a 10-, 20-, or 30-year term are more affordable. Remember, the quicker you pay off the loan, the faster you will reach a point where most of your monthly tenant’s payments are pure profit. 

Not all types of residential and commercial real estate financing programs are available to investors. So you must meet with a real estate lender (preferably someone with experience). Someone who can explain all the pros and cons of your options. Investors who wish to flip a home or hold the property for a few years can consider getting an adjustable-rate mortgage (also known as ARM). These loans offer you a lower interest rate in the initial fixed period. You can even find hybrid ARMs that offer fixed periods of five, seven, or ten years before your interest rate adjusts. When you borrow with an adjustable rate mortgage, you should ensure you know when your interest rate may change. How much it can adjust, and how often the rates adjust so you are always prepared if the rates rise. 

Qualifying For an Investment Property Loan 

Though you may count on your future rental income to cover your mortgage payments. Or assume you plan on selling the real estate before you have to make more than a few monthly payments. A lender will qualify you for investment real estate finance, depending on your current ability to repay your loan. If you are buying a real estate property with a long, proven rental history. Your lender may immediately include part of your future rent as income. As a real estate investor, you will need excellent credit and sufficient cash reserves. And a low DTI ratio to prove you can handle your real estate investments with no issues. Your lender might also appraise the real estate you plan on buying to ensure it has enough value to justify your loan. 

This Is Your Sign To Start Investing! Get In Touch With Real Estate Funding Solutions For More Information!

If you feel you’re ready to begin your journey as a professional real estate investor. Then it’s time to get in touch with Real Estate Funding Solutions immediately! All our professionals have several years of training and on-field experience dealing with investment real estate. They can use this knowledge to help you find an ideal investment opportunity in your local area. Moreover, we can also help you determine what type of real estate funding is right for you and ensure you get a fair deal. Call us at 855-913-8637 for more information.