What To Consider When Applying For An Investment Loan?

Answer 1

Imagine that you have just been made privvy to a wonderful investment opportunity but do not have the funds necessary to complete the transaction on your own; what do you do?

Investment property loans were created for this very purpose. This type of loan is secured to purchase a property for investment purposes. Often, this property is purchased with the intention of using it as a rental property or similar investment. It is difficult to find homeowners with the secured funds to seal the deal without a loan, so potential buyers look elsewhere. Typically, the investment loan is paid off by renting the property out and using a portion of the rent money for the loan payment. In this economy, the housing market is tailored toward buyers. Homes are becoming more and more affordable and often sold for under their real values. Here are some things to consider when securing an investment loan:

1. Affordability -- Focus on how you will be paying for the investment loan payments. Go back and check over your credit score, clean it up if you can; you will need a clean credit report if you want the best loan terms that are available. Look at your financial situation as it stands and obligations that you already have. If you are planning on renting the property out to cover the payments, prepare for the worst: there may be a lull where you are not receiving money from tenants. You want to avoid the house going into foreclosure and losing all the money that you have put into the investment, including still being liable for the remaining balance on the loan.

2. Down Payment -- To even get approved for an investment loan, you have to meet the down payment standards at 20% of the loans total cost. Previously, the housing market required this; the booming industry saw it become more lenient and turn into more of a guideline. The standard is back, and if you want a chance at an investment loan, you need to make sure that you can cover the initial costs. Always consult with a lender, even if 20% seems like an impossible feat; they may let you slide with a lower amount, but you will still be responsible for it in the long run.

3. Terms and Rates -- If you know what you can afford, you are in a good place when preparing to apply for an investment loan. Do your research and find out what terms and rates are available to you; talk to multiple lenders and get multiple quotes. You can compare and contrast these terms and rates online through designated websites like LendingTree. Do not be afraid to haggle; you can often get a better deal if you are not afraid to ask for what you want. As a consumer in this market, you have the right to pick and choose. If you don't like the terms, walk away. You can find someone who is willing to take a chance on you.