Mortgage Lenders in Sacramento Provide Financing for Investment Properties
Not as easy as it looks
There are however a few items you need to become a successful real estate investor.
- Substantial down payment. Traditional Non owner occupied investment mortgages require, at minimum, 20% or more of the purchase price to be in cash.
- Ability to secure a loan-this is key! The same lending conditions which are creating these amazing prices are doing it by making it tougher for people to qaulify for loans.
- Experience managing property or contacts who do. In this market, it is usually not possible to “flip” property just by doing repairs…you must acknowledge the possibility of needing to rent out the house for a year or two.
- Assistance of a seasoned, expert real estate agent. A soccer mom who is a Realtor on the weekends will not do. You need representation by an Agent who knows the players involved and can use every single possible advantage.
Investment Property Home Loan Finance Options
There are essentially three different means of financing investment property:
- Conforming loans which are offered by Banks or Brokers which are sold to Fannie Mae and Freddie Mac.
- Portfolio lenders are Banks that lend and service their own money. They will never sell the loan and are free to set their own guidelines.
- Hard Money loans are made by money brokers, groups or individual investors. Mostly unregulated, loans are based only on equity in the property.
Which is The Right Home Loan Choice?
| Loan Type | Trashed Property? | Bad Credit? | No Income? | Creative Financing? | Days to close | Down Payment | Cost (range) | Rate (range) |
| Conventional | Never | Never | Never | Never | +/-21 | 20% | 1-2 Points | 6.25%-7.00% |
| Portfolio | Always | Sometimes | Sometimes | Sometimes | +/-35 | 10-30% | 3-5 Points | 9.00%-12.00% |
| Hard Money | Always | Always | Always | Always | 7 or less | 30% or more | 6-15 Points | 12.00%-20.00% |
|
“always” Status does not guarantee loan acceptance |
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It is clear that Conventional loans are the least flexible, and Hard Money is the most. But that flexibility is very risky and thus expensive. Such a choice is usually made by the property which you decide to purchase, or the components of your individual financial situation.
So what if the house is trashed, anyway?
Suppose you are in contract to buy a foreclosed home. You have excellent credit and have been approved for a low cost loan through your bank. The property inspector finds extensive repairs are necessary to the plumbing and roof. Even though the seller will discount the sales price steeply, your bank declines the loan calling the property “uninhabitable”. But you can instead secure a rehab loan based on the future appraised value, which can finance the needed repairs and allow you to complete the transaction.
Example:
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Sunrise Vista Mortgage Rehab Loan |
Standard Conventional Loan |
||
|
After repairs value= |
$310,000 |
N/A | N/A |
|
Purchase Price= |
$200,000 |
$200,000 | =Purchase Price |
|
Repairs= |
$25,000 |
$25,000 | =Repairs |
|
Closing Costs= |
$12,000 |
$8,000 | =Closing Costs |
|
New loan= |
$217,000 |
$160000 | =New loan |
|
Cash to Close= |
$20,000 |
$65,000 | =Cash to Close |
In this case a normal Fannie Mae loan would have required 20% down or $40,000, plus repairs, so this investor benefits by holding onto as much of his cash as possible.
Speak to One of Our Investment Finance Specialists Today
The Sunrise Vista Mortgage Team is dedicated in providing top-notch financial services with the lowest rates possible. We have created lasting relationships with each and every client and are here to serve you. Give us a call at (916) 729-2000 to speak to a Sacramento mortgage broker regarding your loan needs.
