Real estate investments can be quite lucrative but some individuals can run into difficulties because they do not understand their financing options. Fortunately, there are a variety of options available when it comes to financing real estate investments. At Hunter Creek Mortgage, Inc., we offer a number of financing solutions for Idaho real estate investors looking to purchase properties throughout Boise, Meridian, and Caldwell.
Before you even begin applying for loans or seeking out specific investment properties, you will want to thoroughly prepare. One place to start is making sure your credit is in order. Investment properties typically required a higher credit score for approval. Additionally, a better credit score can mean a better interest rate. Check your credit score in advance. If there are any issues or mistakes, it is best to resolve them prior to applying for an investment property loan.
In addition to higher credit score requirements, buyers will generally need to provide a larger down payment for investment properties depending on the type of loan they choose. Some may require that at least 20% be put down, but if you can put down 25% or even more, you may be able to qualify for better interest rates.
Think about the types of properties you plan to invest in. You will have different financing options for different properties. Additionally, purchasing second homes rather than investment properties can allow the borrower to obtain a move favorable rate.
Once you have done all of the necessary preparation and are ready to begin your journey in real estate investment, you can begin to look at financing options.
Conventional Loans
Conventional loans are quite common for real estate investments. A conventional loan is any mortgage not guaranteed by a government agency. One reason for their popularity is the fact that government-backed mortgages are not available if the buyer does not plan on occupying the home. Interest rates tend to be quite favorable on conventional loans as well. Traditionally, conventional mortgages require a down payment of 20% but again, investment properties may require the borrower to put down a greater amount.
Government-Backed Loans
Loans that are backed by the government such as FHA loans and VA loans are not available solely for investment property purchases. However, these loans can be used to purchase one to four unit properties. If a homeowner purchases a two, three, or four-unit property, and intends to occupy one of the units, they may use a government-backed loan to purchase the property. The remaining units can then be used to produce rental income.
Home Equity Loans
Borrowers with equity in their homes may be able to use that equity to help finance the purchase of investment properties. Instead of going through the process of obtaining a loan to purchase a property, an investor can take out a home equity loan on their current property, and use the cash received to purchase an investment property. Since the home equity loan is based on the value of your current property, interest rates can be more favorable, and approvals can be significantly easier.
No matter what your investment strategy might be, Hunter Creek Mortgage, Inc. can help you with all of your financing needs. If you are planning to invest in real estate throughout Boise, Meridian, or Caldwell, contact us today to find out more about your financing options!
