Financing – How to Get Financing for Real Estate Investments
One of the ways you can get financing when trying to finance your real estate investment is by working with mortgage brokers.
Mortgage brokers are people that are going to find you a mortgage through multiple sources or through one of many sources.
The difference between a mortgage broker and somebody who works for a bank is a mortgage broker has access to many different lenders and those lenders could bank as well.
What happens is you go in, you fill out an application and you do all the necessary paperwork for a mortgage broker. They sit down and they look at your finances and look at your current situation. They look at your credit score. They look at your capability, they look at the property. They look at all the same things as a bank mortgage initiator does or whatever they may be called at the bank.
What they do is then they go and they look at their list of mortgage providers, meaning the list of lenders. From that, they determine who is going to be the best fit for you. Now that doesn’t necessarily mean that those lenders are going to approve you, but then what they do they will submit it to the one who makes the most sense.
By the most sense, I mean is the one that looks like they are aligned the best with what you’re looking for.
Some people specialize, or some lenders will allow for investment properties, and some won’t. Some will allow for situations that are unique to your credit such as your credit score, some require higher credit scores and some will allow for lower down payments than others.
There are some rules that would stop them from providing you with a higher loan to ratio mortgage than others.
What they do is submit your application to this lender. And if the lender approves you, they come back and then you finish all the necessary paperwork.
The big thing about mortgage brokers is they only pull your credit once.
If you don’t get approved by that lender, they can resubmit it to another lender and another lender, and it doesn’t affect your credit score because they’ve already pulled your credit. That credit is recorded on your application. The other nice thing about working with mortgage brokers is that they have access to what’s called “A” lenders, meaning banks, which are, big banks. “B” lenders, which are smaller.
There are banks that specialize in mortgages. There are companies out there that provide financing that only do mortgages.
For example, mortgage investment corporations (MICs) are one example. There are a number of institutions that only do a mortgage. They have not deposited banks. meaning you don’t hold a bank account with these banks that you are going to send your application to.
The other thing that the mortgage brokers work with is private lenders. In addition to having access to all these A and B lenders, they also have access to private lenders or just individuals or individual companies that are investing in mortgages.
What they do is they take your application and they’ll send it off to this private lender.
Private lenders are people that understand the risk better.
Private lenders are more open to a higher ratio, mortgages. They are more open to problems with your credit score. As a result, you are going to pay a higher premium or a higher interest rate.
For example, today’s mortgage rates might be 3%, 4%. A private lender might be charging you 7%, 8%, 9%, or even 10% for the same type of mortgage.
You should never go to your bank directly to get a mortgage because if you do, and you don’t like the terms you have to go to another bank and that is going to affect your credit score.
Go to a mortgage broker who also has access to many banks. And I guarantee you they will give you the best mortgage that is the most suited for you, that is the right fit for you.