A Comprehensive Guide for Individuals Interested in Financing Investment Properties – Part 2
Thank you for rejoining us for the concluding installment to our series, A Comprehensive Guide for Individuals Interested in Financing Investment Properties. Last week, you learned that the housing market is gaining. Results of these gains have been observed in both 2015 and 2016. Now is the time to obtain financing for investment properties. You learned about the various benefits associated with the purchase of such properties. You also learned about the additional expenses that commonly occur with investment properties.
This week, we will conclude our series with information on getting started with the investment property home buying process. If you are serious about investment properties, continue reading for absolute essential information that will help you get the financing that you need.
Your Individual Credit Needs Will Determine Your Borrowing Ability for Investment Properties
When you are ready to start the home buying loan process for investment properties, the first thing that you will need to know if that your individual credit needs will determine your borrowing ability, as well as how much you are approved if a bank elects to provide you with an investment properties loan. You should perform the following steps before visiting your bank:
- First, check your credit report. If there are any questionable items on the report, either fix those issues or come up with a plan to improve your credit.
- Next, save up money! You will need to cover both the down payment and the closing costs. You should save as much as possible. The more you have, the more likely you are to get approved for your investment property loan.
- If you plan on putting down less than 20%, you will be required to obtain Private Mortgage Insurance (PMI). If this is the case, you need to use a mortgage payment calculator to determine how much your payment, interest, and other expenses will cost each month. This will help you determine if this is an ideal move for you.
Once Approved, What’s Next?
If you approved for a loan for your investment property, you will move forward. Once you have obtained approval, you must then make an offer on the home. You should compare similar homes, determine the market value of the home, evaluate the condition of the home, and consider the date that you want to close when making an offer.
You should then put your offer in writing and submit a “good faith” deposit on the property. If the owner approves your offer, you will then finalizer the purchase contract and close on the property.
There are many advantages to purchasing investment properties. Here at Somerville National Bank, we offer loans for these types of properties, as well as many other types of loans. These include agricultural land loans, building site lot loans, commercial loans, mixed-use property loans, USDA rural development loans, home equity loans, and more!