An improving economy and low prices have inspired investors to dive back into the real estate market here in California. But financing is no longer quick and easy: there is a tighter credit market that can make it difficult to secure financing for investment property.
As a prospective investor, securing financing is essential for your operation. Here are four tips which may increase your chance of success.
- Provide a good-sized down payment. To obtain regular financing for an investment property, you will likely need to put down at least 20 percent, because mortgage insurance doesn’t cover these properties. A larger down payment will often result in a lower interest rate as well.
- Improve your credit score. Investors should check their score before applying for a loan, as the result will have the biggest impact on the loan’s terms. If your score is below bank standards, you will either pay a higher interest rate or pay a fee to keep the interest rate favorable. While improving your score isn’t something that you can do overnight, it is worth working towards.
- Use smaller banks. If you can’t offer a sizable down payment, try applying at a smaller local bank for financing. They tend to be more flexible than the larger institutions and may even look favorably on applicants seeking to invest locally.
- Ask for owner financing. Although this type of request used to make sellers
uneasy during the days when getting a bank loan was easier, the credit crunch has made it more common. To motivate a seller to accept your proposal, put a game plan together and sell the owner on it. Give them reason to believe that you can and will honor your obligation.
As a real estate investor, access to financing will often make or break your investment strategy. Hopefully you’ll find these tips helpful – and don’t hesitate to reach out to me with any further questions about your real estate investment venture!
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