- September 23, 2017
- Posted by: steve
- Category: mortgage news
Managing investment properties can have a real impact on your mortgage rates.
While managing investment properties can be a great way to boost your wealth big time, it can have a real impact on your mortgage rates.
Investing is inherently risky–whether you’re looking toward the stock market or getting into the property game. If you’re getting serious about buying investment properties, there are a few key things you’ll want to know before pulling the trigger.
Here is a quick look:
What Kind of Property Are You Considering?
First, you’ll want to figure out what type of property makes the most sense for you. Is it a condo? An apartment complex? A home or a full building?
Is this a Short Term or a Long Term Investment?
You’ll also want to figure out if you want to invest your dollars for the short term or be a be the landlord in the long term–collecting rent from business or residential tenants.
An example of short-term property investments would be purchasing homes, fixing them up and reselling them at a higher price point–aka, flipping.
If you’re looking to go the landlord route, you’ll need to pay close attention to the mortgage rate, as compared to the rental market in your area.
Ideally, tenants should be paying enough to cover the mortgage and then some, so further research needs to be done to determine whether the investment will turn a profit.
Keep in mind, federal tax code rewards investors who wait. Sellers will end up paying more taxes on capital gains earned from buying and selling a house in short order.
In these post-recession days, interest rates remain relatively low, but it can be difficult to get financing for investment (or any kind of) property.
In many metro areas, the price for a standalone home has gone up substantially, proving challenging for prospective investors to obtain a loan with ease. Here are a couple of ways you can
Here are a few ways you can improve your chances of securing a loan:
Work with a Lender Who Understands Investment Properties
Some lenders work primarily with buyers looking for single family homes. There’s nothing wrong with this, but it may be easier to convey your goals to a lender specializing in investment properties.
Get Your Credit Score in Order
The more loans you have, the harder it is to get a new one. If your credit score falls below 720, getting a loan for an investment property may be a bit tricky. Fannie Mae even has separate guidelines for dealing with investors over and under that 720 mark.
Make a Big Down Payment
Mortgage insurance doesn’t cover investment properties, and as a result, you’ll need to plunk down a minimum of 20% to get financing. A higher down payment can get you a bit further, proving you’ve got the funds to avoid defaulting on the loan.
Additionally, proving you’ve got enough expenses in the bank to cover several months’ of expenses goes a long way, too.
Learn What You Can Afford
Once you’ve got a sense of what kind of investment property works with both your budget and your long term goals, it’s time to take the first step.
Whether you’re purchasing your first home or the latest in a series of investments, find out if you’re qualified for a loan by visiting the New Florida Home Mortgage website.