How Do I Get a Mortgage for Investment

Investment Properties

Investment properties differ from primary residences in the sense that you do not intend to occupy the investment property. You should also be aware that investment properties are not limited to homes that you buy at a reduced price, fix up, and then sell for a profit (also referred to as flipping houses). Homes and other buildings are also considered investment properties if your intention is to retain them and rent them out.

Why is this important to know? You will soon discover that most lenders offer higher interest rates for investment properties than they do for mortgages that will be used as primary residences. You need to know what mortgage qualifies as an investment and what mortgage qualifies as a primary residence. You don't want to consider masking the fact that you intend to use the home as an investment property in an attempt to get a lower interest rate. When you close on a mortgage loan for a primary residence you will be required to sign an affidavit saying that a home will actually be your primary residence, and you certainly don't want to misrepresent yourself on legal documents -- that can only lead to trouble.

Lenders

Most mortgage lenders dealing in loans for primary residences also offer mortgage loans for investment properties, although some lenders only do this to expand their offerings. You can tell which lenders would rather not issue investment property mortgages to begin with because they have the most unattractive interest rates and terms for this type of loan. Don't assume that the lender you currently do business with for your other lending needs will be the best lender for your investment mortgage. Although you may have an enviable interest rate on your current home loan, the product offered for investment properties may be a lot worse than you could find with a different lender.

It's helpful to look for a lender that specializes in loans for investment properties, or for a lender with a large enough client base that they can afford to offer attractive terms and interest rates on investment properties. If you have excellent credit then try to find a lender who specializes in issuing mortgage loans to applicants with high credit scores. In most cases you should not do business with a mortgage lender that specializes in helping people with bad credit get investment mortgage loans because you will probably not get the best interest rate available, even with your great credit history.

How Do I Get a Mortgage For Investment?

Apply for an investment mortgage loan just like you would for any other mortgage loan:

1. Search for the best interest rates and terms.
2. Contact your preferred lender and find out about application procedures.
3. Upon credit approval and acceptance of the bid, schedule a closing date.
4. Go to closing and pay closing costs unless there is a different arrangement with the seller.

It's important to remember that a real estate investment loan is similar to a mortgage for a primary residence in the sense that you still have to go through the process of applying, you still have to pay closing costs and other fees, and you still have to maintain a current payment history in order to avoid foreclosure.

If your question is "How do I get a mortgage for investment quickly and easily?" then here are a few factors which may help make the process a little easier:

• Maintain an excellent credit history.
• Know the approximate value of the home before applying for the loan.
• Have a substantial down payment available for the loan.

An applicant with bad credit who does not have a down payment and who applies for a loan amount that exceeds the value of the investment property will encounter many difficulties when trying to get approved for the loan. It is far preferable to have all your financial ducks in a row before jumping into real estate investing, let alone the mortgage application process.

By Tamsen Butler