How can you get a better loan and ensure financing investment property goes more smoothly?
Financing and the ability to leverage investments is one of the huge advantages real estate offers. It can also be one of the biggest sources of frustration and friction in doing deals.
So, what tips can help you get more of the pros, and less of the cons when investing in real estate?
1. Vet Your Lender & Loan Officer Carefully
It sounds obvious. Yet, many real estate investors drop the ball here and end up paying dearly for it.
You need a reliable, capable, and investor-friendly lender that wants to make the type of loan, on the type of property that you are applying for.
They should have a high application to closing ratio, a reputation of closing on time, and delivering on the terms and quotes that they promise.
For real estate investors, this is not going to be found at your local mainstreet bank. No matter how much money you put through your checking accounts. You need a specialist lender. Maybe even a private money lender.
How the transaction plays out when it closes and the final terms will rely heavily on your loan officer or mortgage broker, not the company name. Make sure you pick a good one.
2. Get Qualified Early
You don’t want to be out there wasting precious time and money searching and making offers on investment properties only to find out that you can’t get funded.
Be sure you have your financing lined up well in advance with Proof of Funds. This will also give you more power in getting to see the best properties, and negotiating great deals quickly.
Know how much you can borrow, and what the rates, payments, and closing costs are likely to be.
3. Understand What Can Make Or Break Your Deal
While a generic loan pre-qualification may be handy and essential, it is still a long way from getting to a closing.
It may help you get a purchase contract signed. Though that’s when the real work and underwriting starts.
You want to understand the fundamentals of that approval, and what can wreck it. Such as property types, price range, property condition, and more.
4. Ask What Loan Features & Terms You Can Use To Optimize For Your Strategy
There are many, many, loan programs, features, terms, and combinations. A good lender will lay them all out for you even if it’s not a loan they can fund. You would be so bewildered that you’d never make a choice or move forward.
You want them to understand your investment strategy and goals upfront. This way they can curate the loan which best fits those objectives and needs.
Still, it pays to know your options so that you can fully customize your loans. Such are opting for or against a prepayment penalty, offering to pay more upfront points for a lower long-term interest rate, etc.
Ask what you can change to get the terms you want.
5. Be Sure Your Lender Works Well With Your Other Vendors
An investment property transaction is like an orchestra. It is a symphony of many players, who all need to play well together, with precise timing.
This applies to your title company, insurance agents, and real estate brokers. If they don’t get along, then you can forget about closing. Whereas you can see things speeding along and challenges cleared quickly when they have good relationships.
While you always have the legal right to choose these individual service providers, asking your lender for referrals can make the whole transaction go far more smoothly.
Alternatives
If getting financing on your investment property purchases sounds like a lot of work, then consider some alternatives.
Such as acting as a private lender, or investing passively through real estate investment companies that make loans to front-line active investors. Be the bank, and make great returns, without having to jump through the hoops yourself.
