While the market may be good for purchasing in your desired area, a stricter credit market may not be as easily conquered. It’s not impossible to secure financing. Lenders are lenders. Giving it away is their business. Making yourself a worthy candidate is how you will ensure they’ll give it to you.
A good rule of thumb, is to have a sizeable down payment. Twenty-five percent is a great down payment, but you’ll need at least twenty in most traditional financing environments. The better the down payment, the better the interest rate. Budgeting ahead of time, preparing yourself to invest will allow you to get a good deal so that you don’t end up paying an exorbitant amount in the long run because of a high interest rate. The suggested 25% will undoubtedly qualify you for the best possible rate.
We’ve stated this in countless ways, but make sure your credit is stellar. This is necessary for financing the initial purchase as well as any subsequent repairs and remodeling. By maintaining or cleaning up and then maintaining favorable credit scores, you make yourself a strong borrower. A strong borrower will also demonstrate an ability to maximize their investment. Lenders now want borrowers—especially those with multiple properties—to have reserves that can cover carrying costs for at least six months, in the event of vacancies. Favorable credit scores will at least show an ability to acquire funding you don’t already have on hand.
Another bit of advice is to shy away from BIG banks. Your instincts might say a bank with a national or even international presence is best, and that’s certainly a way to go. However, if you have extenuating circumstances that prevent you from having that 20-25% down payment, consider a neighborhood bank. For one, they’ll have more flexibility. They are not trying to adhere to stringent lending policies that are implemented, across the board, nationwide. Additionally, they know the market better, because the market is their backyard. Local institutions have interests investing locally. In a perfect world, you would make an all-cash purchase and leave mortgage lenders alone, altogether. The world’s not perfect, but there is a perfect lender for you and your investing situation. Investment properties might be the key to securing your financial future. It may not be easy, but nothing worth it rarely is. Do your homework, and as usual, Carod Properties is here to help!
