Four Options to Fund your Investment Property


Jumbo loans

Many investors have made a significant amount of money in the real estate industry. The real estate market tends to hold its value pretty well, making it a great place to invest. If you are currently considering purchasing an investment property, you are probably wondering where to get financing. There are a few financing options available when it comes to investment properties.

Apply for a traditional conventional mortgage
A conventional mortgage is probably the most traditional financing method to choose. They are relatively simple to apply for and if you have good credit, a down payment, and a good income, you are likely to be approved. Some real estate investors do not agree with or would not place a conventional mortgage as their top choice. Conventional mortgages often come with high interest rates and if you already have a mortgage on a residential property, it can be challenging to get approved.

Find a private silent investor
This might not be an option for everyone. However, if you have an interested investor that can provide you with cash for the investment property, you will find that this is often the preferred financing option. You generally have more buying power when paying with cash, because the seller doesn?t have to wait for mortgage approvals or deal with financing inspections. Inspections can sometimes be problematic, especially if you are purchasing a house that needs a significant amount of work. Silent investors supply you with the cash and expect a specific amount of return after the house is sold. They might require you to use your house or car as collateral. You have more room in terms of negotiating interest charges with a private investor though.

FHA mortgage
An FHA mortgage or first time homeowner?s mortgage, is a unique option for investment properties. Approximately 32% of people looking to buy new homes are first time home buyers. FHA loans are often easier to be approved for and do not require as much of a down payment. The only downside, however, is that you are often required to live in the house for a specified amount of time. An FHA loan might be a good option if you plan on living in the investment property while you fix it up. It is possible that you will be limited on the type of investment property you purchase though, as FHA lenders can be stricter when it comes to needed renovations. According to the 2017 NAR Home Buyer and Seller Generational Trends report, about 24% of home buyers choose an FHA loan.

VA mortgage loans
A VA loan is reserved for those who have served in the military or are actively serving in the military. Although these loans are usually reserved for those looking to purchase a home they will live in, this does not mean that you cannot purchase an investment property. You will likely have to live in the house while you fix it up, but you can sell it for a profit after the required amount of time. VA loans have loosened mortgage requirements and usually, do not require any amount of down payment upon closing.

In 2016, approximately 14% of buyers financed 100% of their entire purchase with a mortgage. Mortgage planning is an important part of the buying process, whether you are buying a house to live in, a vacation home, or an investment property. Investment properties are very common for those looking to turn a profit in the real estate industry. There are many ways to obtain financing for an investment property, including the traditional financing options of FHA, VA, and conventional mortgage loans.

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