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Real Estate Investment Loans

Sep 22, 2007
If you have decided to take the first step toward real estate investment and have decided to buy a home, then you have made a wise and exciting choice. The most difficult and cumbersome part of real estate investment (aside from choosing a house to buy) is getting your loan completed. Buying a house requires a significant investment, and banks and mortgage companies are careful in whom they choose to loan their money to, and at what rates.

The thing that will save you many hours of frustrations is a good credit score. An excellent score will help the bankers to decide to lend you their money more easily, and the loan itself will be at a lower rate the higher your credit score is. A score of 700 at least will get you a decent loan as long as you have the finances to back it up.

Do not mistake having no credit for having good credit. If you have no credit then you are just as unpredictable as someone is with terrible credit to his name. A score of 350 is the lowest that one can achieve, with 850 being the highest score. Most people are around 680, which is not great but which will usually get you some sort of loan.

The second most important factor to the bank or other lender is how you will pay your loan back to them. The best credit score in the world will not help you if you don't have an income from which to pay mortgage payments. A loan officer will sit down with you and look at your income and expenses, and will help you to decide how much money you can afford to spend every month. They will then help you to find a house in the right price range for you. For this reason it is important to sit down with a loan officer for an initial consultation before you commit yourself to a house that you love and cannot afford to buy.

Your income should usually be steady, meaning that you should have worked with your present employer for at least two years. There are ways to work around this, and there are "high-risk" loans that will allow you to purchase a home regardless of your income, however these loans will usually be at a high rate of interest and are usually made available by companies looking to acquire homes through forfeiture of your loan. Great care should be taken before you consider an interest only or similar loan.

If you have extra money when you are buying your house, and you do not like the percentage of interest on your loan, then you can spend some of that money in closing costs and "buy down" your interest rate. Buying down points on your interest rate can be expensive at first, but will save you a great deal of money over the life of your loan. If you are only planning to own your purchase for a short time, then there is no problem with a higher interest rate. If, however, you are hoping that the purchase of your home will improve your credit score, then you should know that it is considered appropriate to make at least a year's worth of payments on your loan before disposing of it. A shorter loan period could actually hurt your credit score.
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