Viable Mortgage Options For Investors
By Paul Esajian on January 10, 2014
You can spend days evaluating a property and weeks running the numbers, but unless you have financing, all you are doing is wasting time. The number of mortgage brokers and professionals has shrunk considerably over the past few years, but there are still viable options available. If you qualify for a mortgage, you will have your pick between a local bank, larger national lenders, brokers and credit unions . Not each lender has the same products and programs. Who you use to find your mortgage could be the most important step you take in the buying process.
Each lender will have their own independent strengths and weaknesses. Your local bank may not have as many products as the others, but for straightforward and generic loans they may be able to provide the lowest rate and the best service. Larger lenders will have access to more programs, but you will have to cut through layers of red tape in the process that may tack on extra time to your closing. Mortgage brokers have access to various programs and may be able to find the best rates, but the lenders used may be difficult to contact and work with. Credit unions can have lower rates, but they are also limited to the types of deals they can do.
You have to know your options before you shop around. You should know your credit score and debt-to-income ratio before you even start the mortgage process. Mortgage approval is based on credit score, debt-to-income and down payment. If you get a copy of your credit report, you will know your score and all of the minimum monthly payments on your debt. Adding the total monthly debts with your proposed mortgage payment (principal, interest, taxes and insurance) should be less than 45% of your monthly gross income. If it is, and your credit score is over 680, you know that you can negotiate from a position of strength when you shop around.
Under this scenario, you can start with your local lenders. You know approval should not be an issue and you can look for the lowest rate and fees. If your debt-to-income ratio is higher and your credit score is under 650, you may be at the mercy of the only product and program you can get approved for. Your interest rate will be higher and the approval process will be longer. This may be a scenario to use a broker who has access to many lenders. The number of programs has shrunk dramatically over the past few years and is constantly changing.
If you use mortgage financing for your properties, you should be in contact with mortgage brokers and local lenders constantly. New products come in and out of the market all of the time. Giving yourself access to a mortgage broker, local lender and national outlet will give you options to choose from. The more options you have, the better chance you have of finding the best deal possible.