If you’re considering getting involved in rental property investing, you must first set up some money faucets in advance.
You’ll need to find out what it takes to become qualified to purchase real estate investment property because the loan application process is actually somewhat different than becoming qualified to purchase a regular home.
One of the reasons for the higher standard is the fact that a significant number of investors either walked away from investment properties or declared bankruptcy during the early 1990s.
Therefore, it is important to understand that the requirements for being approved for a mortgage on investment rental properties are somewhat different from what you may be accustomed to.
While a home can often be purchased with a minimum down payment, especially if you are a first-time home buyer this is often not the case with rental property.
Many lenders require a minimum down payment of 20%. There are many different sources property investors can tap into for possible financing.
These Investment Property Funding Options Include:
• Mortgage broker
• Local savings and loan or community bank
• Private lender
• FHA ( Federal Housing Association)
Regardless of which option you choose, you will find that most lenders will want to be assured that real estate investors will have a sufficient amount of rental income in order to cover not only the mortgage payment but also other operating expenses such as insurance, taxes and maintenance.
Depending on the amount of rental income that will be generated from the commercial or residential investment property, some lenders may require a larger down payment.
There are also different types of loans which you can use to finance the acquisition of a rental property.
One funding option would be a residential loan. This type of loan can be used to purchase from one to four units.
The most funding options you have as a real estate investor, the more investment property you can acquire and use to build your business. Make sure you have more than one money faucet.
