So you find yourself really considering this whole investing in real estate thing. The concept sounds great, but you know there are still many hurdles. Let’s break through the biggest right now. Financing.
Do Your Research
Step one to making money in real estate is getting off the coach and getting a lender. When investing, you have many options when it comes to getting money. Hard money lenders, banks, private sources, creative and even online crowd-funding are ways of obtaining the loan you need. All of these are great options, but when it comes to your first deal you may want to go with the most common and that is a bank.
Bank loans are normally backed (insured) loans with fairly standard interest rates. 15 and 30 year options are standard, but come in a variety of packages. (i.e. fixed, ARM, and more) You can even get as low as 3.5% down if you will be living in the home!
It is crucial to understand as much as you can about how you might finance you purchase; however, it is not necessary to be an expert when you go out to obtain a loan. It is more imperative that you know what you are buying, such as single-family or multi-family property and a lot about your reason to buy the property, such as flipping, buy and hold or to own and occupy.
Finding a lender
First, find a Realtor! A Realtor can give you many war stories and a lot of them about lenders. But more than that, they will be able to tell you their preferred partners and people who can always close a deal. It’s important to understand that if you are buying and using an agent, which you really should (article on that topic to come), your agent will be required to work very closely with your lender while hitting deadlines and keeping everyone involved in the transaction up to date. On top of all that, agents will know which lenders work best in the local market. This is key when it comes to a hot real estate market.
The Meeting
Don’t be afraid! Just be prepared as you can. I would always recommend meeting with your lender in person for the first time. If anything else this will let you know if they are hip enough for ya.
Here’s the deal… Lenders want your business. They want to help you, shelter you, and give you all the money in the world. When they do, they make money in return. However, as proven by events in recent times (a small bump in the world’s economy) lenders cannot be as gracious as they used to be. This does not mean they don’t want to help you. To be honest, a lender who just wants to give you easy money, doesn’t really care about your business and well-being.
A great lender wants to help and develop a history of strong and healthy business. Credit too low? They can guide you on getting it up. Have to sell a home before buying a new one, (called a sale of home contingency)? Your lender can give you the options on making your offer better. Just like your Realtor, they are on your team.
From The Pro
Don’t believe me? Listen to the man himself. With vast experience in the real estate community and a large resume of closed deals, Chris Aytes of NFM Lending can tell the story better than most.
“Over 60% of Americans have the majority of their net worth tied up in the value of their homes. This means that purchasing a home is one of the first steps on the path to wealth creation. Don’t let the thought of a down payment and closing costs scare you. There are many programs available to assist first time home buyers with these hurdles. Meet with a trusted mortgage advisor to go over these options and answer any questions that you have!”
– Chris Aytes
The punch line? Don’t be afraid. Start creating your wealth!
