Arrange Your Financing in Real Estate Investing
Auto Beauty Business Culture Dieting DIY Events Fashion Finance Food Freelancing Gardening Health Hobbies Home Internet Jobs Law Local Media Men's Health Mobile Nutrition Parenting Pets Pregnancy Products Psychology Real Estate Relationships Science Seniors Sports Technology Travel Wellness Women's Health

Arrange Your Financing in Real Estate Investing

Preapproval in residential owner-occupied real estate is easy and commonly done. Investor pre-approval is more complicated, particularly if some of your income/expenses are attributable to other investment real estate you already own. The lender/mortgage broker must break down that other income to come up with a figure for how much it helps/hinders your ability to get new financing.
                         money lending real estate

Image Credit

Questions to Ask a Lender

Can you get me investor financing?

Don't assume that all lenders are equal. Some specialize only in owner-occupied residential real estate. They may not know how to get investor financing. Others specialize in commercial real estate and are quite familiar with the type of financing you want. Be sure to look for a lender/mortgage broker who can adequately handle your needs. Be wary when the lender says something like, "We handle all kinds of financing." You don't want all kinds - you want a specific kind.

Can you tell me how big a mortgage I can get?

Preapproval in residential owner-occupied real estate is easy and commonly done. Investor pre-approval is more complicated, particularly if some of your income/expenses are attributable to other investment real estate you already own. The lender/mortgage broker must break down that other income to come up with a figure for how much it helps/hinders your ability to get new financing. A good lender will be able to tackle the job and quickly come up with an accurate answer. That's something you want and need if you're going to go out and buy more investment real estate.

Questions to Ask a Seller

Will you carry back paper?

While you might wonder why a seller would want to carry back a mortgage, rest assured, it's the sort of thing many sellers actually prefer to do. In the case of an older seller, he or she may intend using the equity taken from the house to live on retirement. Getting that money out in cash may mean investing in low-interest rate CDs. Keeping it in the form of a mortgage can mean double the interest - something such a seller may be very excited about. Of course, you'll need to convince the seller that you're reliable: not about to simply buy the property, rent it for a few months, and then walk off, leaving the seller to do a costly foreclosure. This is usually accomplished by sweetening the deal with a bigger down payment. Most sellers would prefer 20 percent down when carrying back a mortgage. Many will accept 10 percent. Few will be happy about doing the deal with anything else, regardless of the "no down payment" scenarios many so-called real estate agent gurus seem to promote.

How much equity do you have in the property?

In order for the seller to be able to offer you financing, he or she must either own the property free and clear or have substantial equity. A seller who has no equity can't finance you, the buyer. Therefore, you need to determine just what the seller has to play with. Although this question is asked less frequently today in an era of mostly institutional financing, it is still appropriate. You can begin by asking if the seller will carry back a mortgage. If the seller is agreeable, then your next question should be directed toward just how much, which is really asking about equity.

What terms will you accept?

It's important to remember that seller financing is entirely negotiable. The interest rate, length of the mortgage, whether it's amortized (paid in equal payments) or has no payments and just a balloon at the end is up to you and the seller. Find out what the seller hopes to accomplish with the mortgage, and then try to get the best terms.

 

Shopping online? Find the latest coupon codes for real estate services brands and score big discounts on your favorite brands. Shop through our partner network for the best discounts on popular real estate services stores with exclusive discounts, site-wide promo codes, and single-use codes.
Need an answer?
Get insightful answers from community-recommended
experts
in Real Estate Investing on Knoji.
Would you recommend this author as an expert in Real Estate Investing?
You have 0 recommendations remaining to grant today.
Comments (1)
Steve Rabago

After you decide to provide seller financing you'll need help to administer the note, billing, collections, tax reporting, and loan accounting. www.ZimpleMoney.com can automate the entire process and let you control the process. Our online service is being used by thousands of note holders managing their own notes and collections.

ARTICLE DETAILS
RELATED ARTICLES
RELATED CATEGORIES
ARTICLE KEYWORDS