How to Get Financing for Real Estate Investments
The best way you can get financing when trying to finance your real estate investment is by working with mortgage brokers.?Mortgage brokers are people who can find you financing from one of their multiple sources. These sources include traditional lenders and private lenders.
The difference between a mortgage broker and somebody who works for a bank is that a mortgage broker has access to many different lenders and those lenders could be banks as well.?
The way the process works is you go into the mortgage broker, you fill out an application and you do all the necessary paperwork for the mortgage broker. They sit down and they look at your finances and look at your current situation. They look at your credit score. They look at your capability. They look at the property. They look at all the same things as a bank loan officer does.
What they do is then they go and they look at their list of mortgage providers, meaning the list of lenders. From that, they determine who is going to be the best fit for you. Now that doesn't necessarily mean that those lenders are going to approve you. Next what they will do is they will submit your application to the lenders who make the most sense for you.?
By the most sense, I mean the one that looks like they are aligned the best with what you're looking for.?
Some lenders will allow for investment properties, and some won't. Some will allow for situations that are unique to your credit such as your credit score, some require higher credit scores and some will allow for lower down payments than others.?
There are some specific rules that would stop them from providing you with a higher loan-to-ratio mortgage than others.
What the mortgage broker will do is submit your application to those lenders. Once the lender approves you, they come back and then you finish all the necessary paperwork for that lender.
The big thing about mortgage brokers is that they only pull your credit once.
If you don't get approved by one lender, they can resubmit it to another lender and another lender, and it doesn't affect your credit score because the mortgage broker has already pulled your credit. That credit is recorded on your application.
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The other nice thing about working with mortgage brokers is that they have access to “A” lenders, which are the big banks and “B” lenders, which are the smaller lenders.?
There are banks that specialize in mortgages. There are companies out there that provide financing that only do mortgages.
For example, mortgage investment corporations (MICs) are one example of a company that only deals with mortgages. There are a number of institutions that only do a mortgage. They sre not deposit banks. meaning you don’t hold a bank account with any of these banks that you are going to send your application.?
The other group that mortgage brokers work with is private lenders . So, in addition to having access to all these A and B lenders, they also have access to private lenders which are individuals or companies that are investing in mortgages.
Private lenders are groups that understand the risk better.?
Private lenders are more open to a higher ratio, mortgages. They are more open to problems with your credit score. As a result, you are going to pay a higher premium or a higher interest rate.
For example, today's mortgage rates might be 3% or 4%. A private lender might be charging you 7%, 8%, 9%, or even 10% for the same mortgage.?
You should never go to your bank directly to get a mortgage because if you do, and you don't like the terms you have to go to another bank and that is going to affect your credit score.
Go to a mortgage broker who has access to many banks. I guarantee you they will give you the best mortgage that is the most suited for you, that is the right fit for you.