Read these tips on purchasing an Investment Property. The 5 tips listed below will explain to you how to finance the correct way and get yourself a good property.. And if you need any help with this contact Black and Cherry Real Estate to assist you needs. Read below…
Home prices have been on a steady climb from the depths of the housing crash, leaving many wondering if it is still a good time to invest in the residential real estate market.
According to the National Association of Realtors, 85 percent of major metro areas saw gains in existing, single-family home prices in the first quarter of 2015, while 14 percent saw a price decline.
However, low interest rates are still attracting buyers, according to the NAR, and limited inventory is behind escalating prices in some desirable areas. The NAR predicts continued steady growth in most of the country.
But while interest rates remain low, the days of quick-and-easy financing are over, and the tightened credit market can make it tough to secure loans for investment properties. However, there is some good news: A little creativity and preparation can bring loans within reach of many real estate investors.
If you’re ready to seek out financing for your residential investment property, these five tips can improve your chances of success.
Have a sizable down payment
Mortgage insurance won’t cover investment properties, so you need at least 20 percent down to secure traditional financing for them. If you can put down 25 percent, you may qualify for an even better interest rate, says Todd Huettner, a mortgage broker and president of Huettner Capital in Denver.
If you don’t have the down payment, you can try to obtain a second mortgage on the property, but it’s likely to be an uphill battle.
Be a ‘strong borrower’
Although many factors — among them the loan-to-value ratio and the policies of the lender you’re dealing with — can influence the terms of a loan on an investment property, investors should check their credit score before attempting a deal. It will have the greatest impact on a loan’s terms.
“Below (a score of) 740, it can start to cost you additional money for the same interest rate. Below 740, you will have to pay a fee to have the interest rate stay the same. That can range from one-quarter of a point to 2 points to keep the same rate,” Huettner says.
The alternative to paying points if your score is below 740, obviously, is to pay a higher interest rate.
In addition, reserves in the bank to pay for all your expenses, personal and investment-related, for at least six months also have become part of the lending equation.
“If you have multiple rental properties, (lenders) now want reserves for each property,” Huettner says. “That way, if you have vacancies, you’re not dead.”
Shy away from big banks
If your down payment isn’t quite as big as it should be or if you have other extenuating circumstances, consider going to a neighborhood bank for financing rather than large, nationwide financial institutions.
“They’re going to have a little more flexibility,” Huettner says. They also may know the local market better and have more interest in investing locally. Mortgage brokers are another good option because they have access to a wide range of loan products, but do some research before settling on one.
Recommendations from friends also are a good way to vet lenders, and investors shouldn’t be afraid to inquire about their credentials, and then verify them. “What is their background?” Huettner asks. “Do they have a college degree? Do they belong to any professional organizations? You have to do a little bit of due diligence.”
Ask for owner financing
A request for owner financing used to make sellers suspicious of potential buyers, because almost anyone could qualify for a bank loan, Huettner says. But these days, it’s become more acceptable due to the tightening of credit.
However, you should have a game plan if you decide to go this route. “You have to say, ‘I would like to do owner financing with this amount of money and these terms,'” Huettner says. “You have to sell the seller on owner financing, and on you. You need to present a picture to someone so they’re not filling in the gaps with their worst fears.”
Think outside the box
If you’re looking at a good property with a high chance of profit, consider securing a down payment or renovation money through home equity lines of credit, from credit cards or even from some life insurance policies, says Ben Spofford, an Ohio home remodeler and former real estate investor. As always, research your investment thoroughly before turning to these riskier sources of cash.
Financing for the actual purchase of the property might be possible through private loans from peer-to-peer lending sites like Prosper.com and LendingClub.com, which connects investors with individual lenders.
Just be aware that you may be met with some skepticism, especially if you don’t have a long history of successful real estate investments. Some peer-to-peer groups also require your credit history to meet certain criteria.
“When you’re borrowing from a person as opposed to an entity, that person is generally going to be more conservative and more protective of giving their money to a stranger,” Spofford says.
The article below shares six steps to help understand the process in finding a house. The list tells the beginning and end in buying your first home… Don’t be nervous, but understand what your doing and find the house you really want. Read more below….
If we have a very firm move-in date in mind, when would it make the most sense, practically speaking, to begin our formal house hunt? Thanks.
Buying your first home will be exciting, fun and the biggest financial decision you will make in your lifetime. So planning for it in advance is a great idea. So if you have a date in mind for when you want to be in the house, here’s a typical timeline that could act as your road map. Keep in mind that there will be a lot of important decisions and events along the way and will take about six months to complete (if everything goes rather smoothly). Here are my typical six steps to that dream home:
1. Your credit and credit score (FICO) can never be too good: You can get a free credit report annually atwww.freecreditreport.com. Better yet, get a referral for two or three mortgage lender and Realtors. The lenders will also pull your credit report and they can advise on what programs you qualify for based on your credit history, income, employment and ability to repay the loan.
2. Examine your credit score: If your score, typically, is 640 and above, you should get a preapproval, not a “prequal,” letter from the lender. You will also have more than likely chosen your Realtor by now.
3. Now the fun starts: Your Realtor should set up a computerized search for you, and you should have been looking at homes online by now. All of the homes from your Realtor should be available and ready to view. Be circumspect with homes you see online or those you drive past with for-sale signs in the yards. Many websites do not update the status of the homes. If you like a home you drive past, give the address to your Realtor and let him/her check the Multiple Listing Service for you.
4. Don’t fall in love too quickly or easily: The Realtor you select matters, and, hopefully, you took your time in your selection of that professional. Trust that your Realtor should have given you the current status of your market and comparable home values. It shouldn’t feel as though you are being rushed into making an offer when you aren’t ready.
5. You found your perfect home: You have made a strong offer, the seller accepted and your are now “in escrow,” which means you are moving toward a closing date usually within 30 to 45 days. With the help of your Realtor, the lender inspection and appraisal are completed and the homeowners insurance is put in place. Also, any additional documents the lender needs are taken care of. You complete your walkthrough and the close-of-escrow date is confirmed.
6. Sign, sign, everywhere sign: You sign your loan documents, deed, note and other paperwork pertaining to the ownership of your new home. Depending on what state you live in, you get the keys to your new home immediately or 24 to 48 hours after signing.
Now you celebrate!
Read this article featured below that shares how Homeowners are turning their equity into cash. So start taking advantage of you properties increasing worth. Read more below…
More Home Owners Turn Equity Into Cash
Home values are on the upswing, and home owners who are becoming equity-rich are taking advantage of their property’s increasing worth. Cash-out refinances surged 68 percent in the second quarter compared to a year ago and have reached the highest volume in five years, according to Black Knight Financial Services.
“People realize that refinancing these funds is extremely inexpensive and that rates will eventually rise, so they’re capitalizing on the strength of home-price appreciation,” says Ben Graboske, senior vice president at Black Knight Data & Analytics.
Over the past year alone, mortgage borrowers have collectively gained about $1 trillion in home equity. Those doing cash-out refinances are taking an average $65,000 individually — about on par with the boom times of 2006. However, the volume of cash-out refinances is nowhere close, remaining 80 percent below the 2005 peak.
Borrowers today are also using more restraint. The average loan-to-value ratio of today’s cash-out refinancers is 68 percent, which means borrowers have leveraged 68 percent of the home’s current value. That marks the lowest level in a decade.
Cash-out refinances are gaining the most traction in California, which accounts for 30 percent of all volume, followed by Texas at 7 percent, according to Black Knight. California and Texas have also seen some of the highest home-value appreciation in the country in recent months.
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