Real estate buying is one of the investments that never gets old. Since the value of real estate increases as time goes by, it is a good long term investment for you. If you consider buying a real estate property but don’t have enough funds to do so, don’t worry about it. You have a variety of options you can choose from to fund your real estate investments.
You must maximize the options you have when engaging in this kind of transaction. You need to take note that your cold cash is always an option, but you can make use of such cash on other kinds of investments that might give you higher returns. So weighing over the options on how to get the fund for your real estate investments takes time and effort.
There are more financing options for you than you probably know. You can search for alternative lenders on the internet, such as mulliganfunding.com, a lending institution that provides lending options for businesses and individuals according to their needs. Aside from online alternative lenders, you can make use of traditional lending options such as banks.
To give you a thorough understanding of the different options to get your funds from, here are some of the sources you can tap on:
Federal Housing Authority (FHA) Loans
Federal Housing Authority loans are government-sponsored loans that help people buy a house by giving a borrowing option that requires at least 3.5% down payment. The FHA only guarantees your loan. It does not exactly give you the money.
Unlike other loans, borrowers can get a good interest rate from lenders given that the FHA takes on the part of the financial risk borne by the borrower. You have the option to pick a property with more than two units, live in one of the units and rent the rest of it. Which means that you can freely live while gaining income from holding the property.
The good thing about FHA loans is that they have low down payment to avail it, and you can qualify you easier for loans from banks and other lending institutions. On the other hand, you have to pay for a mortgage insurance premium for the life of the loan. Aside from that, you only get to have one FHA loan at a time.
Paperwork at closing for this kind of loan is more taxing and takes a lot of time than a conventional loan. In addition to the paperwork, it needs to pass a strict appraisal for loan approval.
Adjustable-Rate Mortgage (ARM)
Unlike other loans where the interest rate is fixed, an adjustable-rate mortgage, just like its name, is a type of loan in which its interest rate changes based on the market interest rate. There can be a lot of variations on an adjustable-rate mortgage.
The good thing about adjustable-rate mortgages is that it has a lower initial interest rate than fixed mortgages. Moreover, there is a chance that your interest rate will decrease because it is based on the market interest rate. This type of loan is ideal for short term financing because interest rates don’t fluctuate easily.
While the downside of such an ARM loan is the predictability of its interest rate in the long run, there is a considerable risk that the interest rate will increase over time. Moreover, it isn’t as simple as other loans.
With the increase in technological advancements, you can already access other lending options online. You can access crowdfunding websites that not just help you fund your real estate investment, but can also help you grow your knowledge on how to maximize your real estate investment. In crowdfunding, anyone can contribute money toward helping you get your investment.
Though it is not the main type of funding you would want because it is kind of expensive, but it is rather quick than other funding options. If you want short term funding solution for your real estate investment, you can make use of this kind of funding.
Conventional loans are typically the common type of mortgage. Banks are the ones that usually give conventional loans. The bank loans you the money in exchange for a lien on the property secured by a mortgage.
Out of all the types of financing options, conventional loans are the most widely available and easy to understand. Moreover, it has lesser provisions to follow than other loans. However, there is a limit on the number of conventional loans you can get. Aside from that, you need to have a good credit score to qualify. It also takes almost a month to get through the underwriting process.
There are many ways to fund your real estate investment. You just need to weigh the pros and cons of each type of loan before making a decision. With the right mindset and detailed understanding of each loan, you can eventually land on the right loan for you.