The crash of housing market has created a distant memory. Fortunately, home prices are looking healthy again. Perhaps the question striking in your mind.
Is this good to invest in the residential real estate market?
The value of the property is climbing in most places. The National Association of Realtors or NAR states that 87 percent of major metro areas observe the rise in prices for existing, single-family homes during the second quarter of 2017. On the other hand, 13 percent just saw prices decline.
While the low-interest rates, eliminate the days of quick and easy financing. Simultaneously, the tightened credit market makes it tough to secure loans for investment properties. Still, a little creativity and preparation from financial experts like TCM Financial Services – can help you bring financing within reach of many real estate investors.
If you’re ready to borrow for a residential investment property, these four tips can improve your chances of success.
Sizable Down Payment
Investment properties are not included in mortgage insurance. There you need to pay at least 20 percent of the amount to secure traditional financing. In case, you make 25 percent, you get qualified for better interest rate, according to experts at TCM Financial Services.
However, if you don’t have the down payment money, you can afford to obtain a second mortgage on the property, but it’s likely to be an uphill struggle.
Strong Credit Score
Umpteen factors like loan-to-value ratio and the policies of the lender can influence loan terms on an investment property, you should first check your credit score before attempting a deal.
Below 740 credit score can start to cost you additional money for the same interest rate. The alternate paying point is to accept a higher interest rate. In addition, having reserves in the bank to pay all your expenses – personal as well as investment-related for at least six months has become an ideal part of the lending equation.
Stay Away From Big Banks
In some case, your down payment is quite big or some other extenuating circumstances, you must choose some an option of a neighborhood bank for financing rather than a large national financial institution.
They offer a little more flexibility. Also, they are better aware of the local market and have more interest in investing locally.
Moving on, a mortgage broker is another good option as they have access to a wide range of loan options. Before settling on them, make sure to do some research, such as – What is their background? Do they have a college degree? Do they belong to any professional organizations? You have to do a little bit of due diligence.
In order to have a choice of good property with a higher chance of profit, consider securing a down payment or renovation money via. Home equity line of credit, from credit cards or even via some life insurance policies.
Actual purchase financing of the property might take place through private, personal loan from peer-to-peer lending sites like TCM Financial Services, which connect investors with individual lenders.