Securing funding for a real estate investment can be a challenge, especially if you’re new to the territory. If you don’t have the capital on hand to fund your investment – and most of us do not – here are a few tips that should help you get the funding that you need.
Getting a Loan from a Bank or Mortgage Lender
Traditional bank or mortgage loans are generally a reliable source of capital, but many of these lenders have tightened their qualification requirements in recent years. If you want to qualify for a loan from a bank or mortgage lender, be prepared to put a down payment of at least 20 percent of the sale price. You should also max out your credit score if you can. A credit score of at least 720 is all but necessary if you want the best possible rates. Finally, stick to smaller neighborhood banks when you can. They tend to be more flexible and more knowledgeable about the local housing market.
Getting a Private Money Loan
A private money loan comes from an individual who is willing to invest capital into a real estate investment. They tend to be more flexible with their rates than most banks, so they may be more likely to work with you if you don’t have a high credit score. You should still have a score of at least 620 as well as a debt-to-income ratio under 35 percent to qualify for a good rate. Private lenders might also be willing to lend you more, with some of them willing to lend you up to 100 percent of the cost for purchasing and repairing the property. They can also be great if you’re on a tight deadline and don’t want to wait for a traditional bank loan to be finalized.
Hard Money Lending
A hard money loan is based on the value of the property as opposed to your credit score. They might be a good option if you don’t have a great credit rating, but they also tend to have higher interest rates. Go with one of these if you don’t think you can qualify for a bank loan or a private money loan.
Peer-to-peer lending is a relatively new concept that has made it easier than ever for some real estate investors to secure loans. Many peer-to-peer lending opportunities are found online, and they tend to require a much smaller minimum investment than more traditional lending options. You might not get everything you need from this type of funding, but it’s a great option to keep in mind if you’ve exhausted all others.
For more information on how you can best secure funding for your real estate investment, contact GP Solutions today. We will be happy to answer your questions and help you find the funding option that works best for your situation.