Investment Property Financing
Investment properties can be very lucrative if you have sufficient capital, credit score, and time management skills. Real estate is a huge wealth builder. However, there are many strategies that should be considered when considering the financing. Most investment properties fall in 2 categories: long-term investments which builds equity over time, or a short-term investment where the investor buys the property, renovates it and then sells it for a profit also known as “flipping.”
Whether you are looking for a short-term or long-term investment you are most likely going to need a loan. The following features are standard for investment properties and how you can finance a loan. Investment properties require a larger down payment because there is no mortgage insurance available. The down payment usually ranges from 20-25% depending upon whether it is a Single Family Residence or Condominium. A loan on an investment property will also have a higher interest rate and loan costs to protect against a default. These higher rates and charges are in place because someone is more likely to default on their investment property rather than their primary home. The loan most associated with investment properties is a conventional loan. A conventional loan requires you to put 20% down as well as have a credit score of 620 or above. Loans for investment properties usually have a higher requirement for credit score because it a riskier loan for both the lender and the borrower.
We have completed dozens of investment properties for our clientele and have experienced many of the obstacles. If you are in the market for an investment property, I am able to review all options available so you are informed on most competitive interest rates and loan program.