Monday, June 13, 2016

Investing In Real Estate – Building The Right Team #3: Mortgage Broker/Professional

As you continue your journey in real estate investing, unless you are buying a property with all cash (in that case can you lend us some ?), you’ll eventually need to get a mortgage. But how do you go about doing that? Today, we are going to talk about the next member in building your real estate team: the mortgage broker/professional.

Why do I need a Mortgage Broker/Professional?

The main function will be securing the mortgage for your property purchase. They will also run your credit and applications and move the mortgage along from the initial application phase to giving mortgage instructions to your lawyer for closing.

What will my Mortgage Broker/Professional Do For Me?

Aside from the actual securing of the mortgage, they will shop around to get you best rates, advise you on the best products for your needs and make you aware of any potential pitfalls of a certain type of mortgage. They basically work with you to ensure your interests are taken care of in securing the mortgage.

How Is Financing My Investment Real Estate Different From My Personal Residence?

Financing a personal residence is typically much easier than investment properties. On a personal residence the lender will look at your income and based on that decide how much you can qualify for based on certain ratios. Investment properties are different as they incorporate rental income and so weight is given to income and expenses of the property. There are also different rules ie. you can put as low as a 5% down payment on a principle residence(with mortgage insurance), with investment properties that is usually 20-25% down.

What Else Should I know And Will My Mortgage Broker Be Aware Of?

It is important that your mortgage broker/professional be aware of your goals as an investor. The planning for the future can be much different if you plan on only owning 1 or 2 properties as opposed to 10 or 20. Sometimes it is better to choose lenders with higher rates or less attractive terms, if it helps you down the road qualifying for more mortgages as your portfolio grows. They should help immensely in this regard. Therefore it is a real bonus to work with a mortgage broker/professional that has plenty of experience working with investors.

How Much Will My Mortgage Broker Cost?

Typically the mortgage broker/professional is compensated by the lender with a built in commission into the interest rate. So essentially they are working for you, at no direct cost to you as a buyer!  Check with them on this though as your situation may be unique and may require different services. Note: You will typically have to pay an appraisal fee once you have a property under contract and a mortgage commitment has been given. This will range between $200-500 for a residential property. Sometimes the lender or mortgage professional/broker will take care of this fee.

So there you have it readers. You now know about how important financing is to your real estate investment future. Choose your team member wisely and you’ll be thankful later!

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