I want to purchase an investment property with my husband. How do I go about financing the loan?

Asked by , Wed Aug 29, 2007

Both of our credit scores are above 700. We are looking to spend about $85,000 or lesswith no more than 5% down. Is this realistic? Should I use a broker? We plan to rent the property out (possibly Section 8). We will make cosmetic improvements.

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13
Deborah Engel…, , San Diego, CA
Wed Aug 29, 2007
BEST ANSWER
I have a few investment properties and I think they're great. Before you even get to the financing, you want to be clear on what your goals are: How much positive cash flow do you want/need, and can the property, taking into account income and expenses, do that for you? If you have negative cash flow for awhile, are you ok with that? Do you have enough cash on hand to cover repairs, the difference if there's negative cash flow and to pay the mortgage when you don't have a tenant? A lot of this also involves tax consequences, so you'll probably want to get the help of an accountant. If you still want to move forward, you will want to have a "team" to help you. Find a Realtor in the area that you want to buy who understands investment homes; have a good inspector to inspect the property; if you're not managing the property yourself, find a good property manager; and of course, you'll need a good loan officer. You can either go through a loan broker or through a loan officer at a specific company. Although you both have good credit scores, loans for investment property carry higher interest rates and require down payment. With the mortgage market having changes every day, you'll want to find out from a lender what the current interest rate is, the full payment you'll need to make each month, and the amount of down payment you'll need. My personal experience lately is that 5% is too low of a down payment right now, although a lender can better answer that question. Good luck!
1 vote
Bruce Lynn, Agent, Coppell, TX
Wed Aug 29, 2007
Check with your current lender, also check with your realtor's lender. We typically now see lenders requiring 10-20% down on investment properties. Remember to have some reserves just in case you can't rent it as fast as you want or tenants don't pay as fast as you want.
2 votes
Bryce Hill, , Stone Mountain, GA
Wed Aug 29, 2007
Which mortgage company is your current home financed through? Ask your current mortgage company to help you before you ask a stranger. Your current lender may offer you a new mortgage or an equity line of credit to help you buy another home cheaper than their competition because they are already doing business with your.

Many no-down payment and low down payment loans are not longer around. Your lender may ask for 10% or 20% down payment on an investment property.

If you are looking for foreclosure or investment property, try the U.S. Dept of Housing website http://www.hud.gov/homes/index.cfm. I find that the gov't is much easier to work with on foreclosures than banks. (You will have to pick a HUD Broker to assist you when you get ready to buy a HUD home)

Finally, your local section 8 office will offer free landlord classes. Yet, I suggest using an experienced and motivated agent for at least the first year of renting. You need someone who is familiar with Landlord tenancy laws, Section 8 rules and regulations, and someone to write an ironclad lease to protect your interest in court.

Bryce Hill
Managing Broker
Linear Realty, LLC
brycehill@linear-realty.com
Web Reference:  http://www.linear-realty.com
2 votes
Pam Winterba…, Agent, Danville, VA
Wed Aug 29, 2007
I would consult with a local mortgage broker to determine what financing would be best for you and if there is 95% financing available for a non owner occupied property.

In addition I would talk with my accountant to get some helpful hints on how my taxes will be impacted with the addition of this property to my portfolio. Good luck with you new venture.
Web Reference:  http://pamwinterbauer.net
1 vote
Chris23, , George High, Atlanta, GA
Sun Feb 20, 2011
I realize that this post is outdated but for anyone else who wants to get into real estate investing, I am a real estate wholesaler and my company deals with discounted property deals that investors can pick for all cash, small down payments with a monthly obligation, or use of our joint venture program to partner with one of our group members. Visit us at http://www.abcwholesaleproperty.com for a list of these deals.
0 votes
Renee A Meyer, Agent, Isle of Palms, SC
Tue Aug 12, 2008
In answering your question, first of all, I say "Good for you!" The time is perfect and the rental market in that price range is demanding. You are on the right track getting your financing in order first. Personally, I have 3 Lenders that I call on for making my (clients) closings happen! "It is the "happen" part that you want to be sure of, especially, when the property is right. 10% is most likely what will be required for an investment property, or more. Need contact for a Lender? Just "Holler!"

In answer to your question about using a broker...do you mean Mortgage or Real Estate? Suggestion: A Realtor that you trust, is aggressive, willing to negotiate on your behalf, and will be watching for just the right properties for you IS INVALUABLE! Meet with a few, make a choice...and remain loyal to that person also! With a call or e-mail, I will put my best foot forward. Thank you, Renee
0 votes
Hank Bailey, Agent, Buford, GA
Wed May 7, 2008
Right now forget it. If 5% down on investment is what you have to work with you should wait until better days. From a REALTOR who has been a big investor I can tell you that with scores now a days of "only" 700 there is no way you would pay the interest rate to make it work even if they would take less than the 25%-35% or more down on investment property most lenders are looking at in today's climate. Waiting is good too as prices will probably keep falling for months to come.
0 votes
Melissa Grig…, Agent, Conyers, GA
Wed May 7, 2008
I have dealt with Investors and the Lenders typically require at least 10% down (even in the good times) up to 25%. It depends upon your DTI (Debt to Income) Ratio and your Credit Score. Be prepared to bring them all the paperwork they request.

A good lender/broker (Brokers have more avenues than a traditional mortgage company and typically are on the Wholesale side and not Retail) to use in Georgia is Ameritage Financial Services. Their link is below.

Hope this helps! If you have other questions contact me offline.
0 votes
Marian Mercer, , 31312
Fri Apr 4, 2008
I know of JUST the property - it's in the Bloomingdale area and it's a foreclosure. It definitely needs cosmetic repairs but the price is great for the square footage and the size of the yard. As a buyer, you should always use a real estate broker - it's free for you as the commission is paid for by the seller (even though the buyer's agent works directly for you unless in the case of dual agency). I just spoke to one of my regular lenders, Samantha Joseph - broker and owner of Affinity Mortgage Company ( telephone 912-728-9163) - there are some great loan programs out there for investments but they typically require 10% down. She will be happy to review your options with you if you'd like to call her. I hope this helps!

Marian Mercer
Southern Homes and Land Real Estate
(912) 536-8945
Marian@SouthernHomesandLand.com
0 votes
Debt Free Da…, , 85260
Tue Mar 4, 2008
You need to meet with a banker and start a mortgage application to see what you qualify for.
Web Reference:  http://getprequalified.com
0 votes
Herman Chang, Agent, Palm Beach Gardens, FL
Wed Aug 29, 2007
They will probably require at least 10% down. Shop around and compare what programs are available.
0 votes
P Bright, , Smyrna, GA
Wed Aug 29, 2007
Be happy to get you some help.See http://www.emortgageco.com. We have a calulator to help you.
Web Reference:  http://www.emortgageco.com
0 votes
Joshua Jarvis, Agent, Duluth, GA
Wed Aug 29, 2007
There are several different ways to do it. You should consult with a Mortgage Broker, I have someone I recommend. There are still these type of deals out there if you all of your other financials are in order.

If you're going in knowing you are going to rent it out (not a second home) then most likely it will be an investment class loan.

You should speak with a qualified loan person. I think what you want to do is very "do-able". Feel free to contact me for references.
Web Reference:  http://www.jrjarvis.com
0 votes
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