One of the reasons for this is the fact that a significant number of investors either walked away from properties or declared bankruptcy during the early 1990s. While you should certainly not be punished for someone else's problems, neither do lenders want to be left holding investment properties. Therefore, it is important to understand that the requirements for being approved for a mortgage on rental properties are somewhat different from what you may be accustomed to.

While a home can often be purchased with a minimum down payment, especially if you are a first-time home buyer this is often not the case with rental property. Many lenders require a minimum down payment of 15%.

There are many different sources you can tap into for possible financing. These options include:

• Mortgage broker

• Local savings and loan or bank

• Private lender

• FHA; Federal Housing Association

Regardless of which option you choose, you will find that most lenders will want to be assured that you will have a sufficient amount of rental income in order to cover not only the mortgage payment but also other expenses such as insurance, taxes and maintenance. Depending on the amount of income that will be provided from the property, some lenders may require a larger down payment.

There are also different types of loans which you can use to finance the purchase of a rental property. One option would be a residential loan. This type of loan can be used to purchase from one to four units. The exact options that are open to you often depend on whether the property will be owner occupied.

Another option would be a commercial loan. This is an option when the property is five units or more or it will be non-owner occupied. Due to the fact that it is a commercial loan, it is often far different from a residential loan in regards to terms and requirements. One of the main differences between a commercial loan and a residential loan is the fact that fees and rates are frequently higher on a commercial loan. A larger down payment is also often required. The down payment on a commercial loan typically runs between 25% and 35%. While there are some lenders who may be willing to agree to a higher loan to value ratio; the requirements for qualifying for such loans are usually more stringent. The lender will also carefully examine the ability of the property to generate a cash flow that will allow you to repay your loan. As a result, the lender will typically examine the property to ensure it can provide an income that will not only allow you to cover the mortgage payments and other expenses but also provide enough of a cash flow that you will have additional income to place into a reserve account.

Private party lending is another option for many prospective investors. One option would be to approach the current owner about seller financing. With this option the owner carries back the loan for a down payment and fair interest rate. You may find that you can save lending fees with the options and may also be able to take advantage of making a smaller down payment.

Another option would be what is known as a hard-money loan. This is a type of short-term financing where a third-party makes a loan to assist the investor with purchasing the property. Generally, this type of loan involves a higher interest rate due to the fact that the buyer has poor credit or because the property is in disrepair and requires extensive renovation.

FHA programs are frequently offered through traditional lenders. Keep in mind; however, that FHS does not actually lend money. They do provide insurance for lenders; offering numerous loan programs.

Regardless of which financing tool you choose, remember that there is always the option to refinance at some later point in order to obtain a better rate and terms.]]> http://www.mortgagematchmaker.ca/2010/12/financing-options-for-rental-property/feed/ 0 http://www.mortgagematchmaker.ca/2010/12/finding-a-property-to-buy/ http://www.mortgagematchmaker.ca/2010/12/finding-a-property-to-buy/#comments Mon, 27 Dec 2010 11:02:32 +0000 http://mortgagematchmaker.ca/?p=612 Before you can invest in real estate you need to know what type of properties are available. For many, this means purchasing a single family home that they can in turn rent out. But once again, this is easier said than done. You need to know how to find a property before you can actually purchase one. This may sound easy enough, but if you have ever been part of the real estate game in the past, you know that this is anything but the truth.

Finding a property to buy can be difficult, but at the same time if you are willing to look around you will find something that suits your needs. For many investors, it seems that the best properties always fall onto their lap. But guess what? This is not the case. They have to do a lot of work in order to get put in the right position to succeed.

Once you invest in a few properties there is a very good chance that you will make some friends. If they are also involved in the industry they may be able to act as your eyes and ears. In other words, they will tell you when a great property is heading on the market. This way, you can get your hands on it before anybody else. These connections are a great way to get a jump start on the buying competition.

Of course, you can find properties in more traditional ways as well. No matter if you are a full time investor, or dabble in real estate on the weekends, the internet is a great way to find properties. No matter if you are searching in your local area or out of town, the internet will give you guidance.

Do not overlook the newspaper when searching for properties to invest in. Remember, some people do not take the time to use the internet because they have no idea what they are doing. Check the big newspapers in your area as well as smaller community publications. You never know when you are going to find a diamond in the rough. And when you do, this will turn into big profits for you sooner or later.

Finding a property to buy is pretty much the most important aspect of investing in real estate. If you cannot find something that suits your fancy you are never going to be able to invest with success. So before you do anything else become familiar with the ways that you can locate the best properties.

First and foremost, you will never be able to find the perfect home if you do not put the proper amount of time into the shopping process. In other words, comparison shopping is an absolute must when it comes to buying a home. This will allow you to find out what is available, what you can afford, and how to move forward in the process. With so many homes to choose from you owe it to yourself to take the time to look at each and every one that may suit your needs.

Another way to find the perfect home is to get the help of a real estate agent. While this is far from mandatory, it is something that you will want to consider. When you get the help of an agent you will be able to put a lot of the burden on them, and in turn relax a bit more. They will be able to do all of the leg work that goes into buying a new home such as finding what suits your needs, setting up walk throughs, and then actually negotiating on your behalf. So many buyers have no idea that they can use a real estate agent when they are searching for a new home. If you can do without the help of an agent good for you, but if you feel that they could help you out a bit you should consider what they have to offer.

Overall, finding the perfect home is not as hard as you may think. This is not to say that the buying process is going to be easy, but if you take the time to check out several properties you should be well on your way to success. Remember, there is no hurry when it comes to buying the home of your dreams!

Many home buyers are so eager to get to the home search that they rush through the real estate agent selection process. Keep in mind that the real estate agent you choose is the person that you will be working with throughout the real estate transaction. While it is possible to 'fire' your real estate agent and start over with a new one, you will lose a lot or ground this way.

You have the right to interview as many real estate agents as you would like to make a decision on the professional that you would like to work with. There are many real estate agents on the market to assist you. Each of these agents has a different level of experience and training. They also have different personalities and styles of working with you. Each of these has a factor on the experience you will have.

Don't choose an agent just because he or she was conducting an open house that you attended. A real estate agent you meet in this way should be interviewed and referenced just like an agent that you cold-called or received as a reference from a family member or friend. Avoid making the assumption that just because a real estate agent is working an open house that the agent has experience. This is not always the case.

The best way to find a real estate agent is by asking for references from people you know who have recently purchased a home. This way you can find out a lot of valuable information about the agent before ever contacting him or her. Ask questions about the real estate agent. How did he or she handle the process? What things did the buyer not like about the agent? Did the agent listen to the buyer's needs? These are just a few of the questions you need to have answered about a prospective real estate agent.

Once you have the contact information for a few real estate agents, you should begin interviewing them to inquire about their services. Ask about their specialties. Let the agent know what you are looking for in a home and ask how the agent can help you. Does the agent have experience in working with buyers that are looking for similar houses to you? What is the real estate agentâ's success rate? Finding out this pertinent information about a real estate agent helps ensure you make the best decision.

After you have settled on a single real estate agent, enter an agreement that the agent will work with you exclusively. This prevents the agent from working as the seller's agent in the even that the seller does not use an agent.

What's Good?

With a fixed rate mortgage monthly payments remain stable over the course of the loan. Interest rates in the economy can go up or down, but the interest rate for your fixed rate mortgage remains the same. This means that your monthly interest and principal payments will not change as long as you are paying the loan.

No unexpected increases in monthly payments due to interest rate increase. Since the interest rate does not change, you are not subject to increases with your monthly payment as you would be with an adjustable rate mortgage. With a fixed rate mortgage, you don't have to worry about income increases to ensure you will be able to cover future mortgage payments.

Easier to budget because your monthly payments are stable. Since you always know what your monthly payments are going to be, it is easier to budget from year to year when you have a fixed rate mortgage.

What's No So Good?

Higher initial monthly payments as compared to an adjustable rate mortgage. In the first few years of your fixed rate mortgage, your monthly payments will be higher than if you had an adjustable rate mortgage.

A higher income is necessary to qualify for a fixed rate mortgage. This is because the fixed rate has a higher interest rate and subsequently a higher monthly payment. Lenders need extra assurance that you will be able to handle the monthly payment. Thus, the increased income requirement.

May need to refinance if interest rates drop. If market interest rates drop and you keep your fixed rate mortgage, you will end up repaying much more in interest than if you refinance. Should the time come to refinance, compare the amount that you would pay in interest over the life of your loan to the cost of refinancing and the amount you would save.

Repaying in Half the Time

One of the factors that attracts borrowers to the fixed rate loan is the ability to repay in 15 years instead of 30. All the characteristics of a 30-year fixed rate mortgage are present with a 15-year mortgage, but there are some key differences. The interest rate with a 15-year fixed rate mortgage will be lower than that of a 30-year. However, since you are repaying the loan in a shorter period of time, the monthly payments will be higher.

Is the decrease in interest rate worth the increase in price? Usually, a borrower chooses a fixed rate mortgage, not because of the lower interest rate, but because of the decrease in time it takes to own the home. With a 15-year fixed rate mortgage, the homeowner gains home equity quicker than with a 30-year.

Most of us have seen television programs where an expert in the field visits ordinary Joes who are renovating a house in order to sell it for a profit. What is impressive about these renovations, usually, is that they seem to be carried out by people who have been detached from reality. Despite the probings of a successful real estate developer who has made millions from doing what they are trying to do, they will insist that a doormat woven from real mohair, or kitchen tiles that are adorned with individually-drawn cartoons by a big-name artist, will add an extra zero to the value of the house. It won't.

At the same time, other people will look at the house and decide that it only needs minimal work done in order to ensure a profit. A couple of licks of paint and a new floor in the kitchen will not add value to the price at least, not any amount worth doing so much work for. Judge wisely how much work needs done, do that and move on.

First, consider whether you want to look for rental property on your own or whether you wish to use a broker to assist you in the process. There are certainly many advantages to working with a reputable broker when you are looking for investment property. In many cases, brokers may know of properties which have just come on the market and which may not have been noticed by others yet. A broker is also usually well versed about the local neighborhood, which can be important if you are not from that area.

Before you actually begin looking at prospective properties, make sure that you have gone through your finances and have them in order. Ideally, you should check your credit report several months before you plan to make a purchase in order to be certain that there are not any inaccuracies which could prevent you from obtaining a mortgage for the purchase of your investment property. Be sure to check with all three credit reporting bureaus, not just one, to get a clear picture of your credit standing. Assuring that your credit is in order can also help you to obtain a more favorable interest rate.

It is also important to do your research about the local market so that you do not overpay for the property you ultimately purchase. When you do purchase a piece of investment property, you need to make sure that the deal you strike allows sufficient room for a profit margin just in case there are times when you do not have a full occupancy.

Carefully consider both the advantages and disadvantages of purchasing a property that could be labeled as a fixer-upper. Take a look at 12 home buying terms you should know. While you very well may be able to purchase the property for less money than other properties, you may very well find that you have purchased a money pit. In the event that a lot of major repairs and renovations are required, this can equate to a large investment of both time and money. In this case, it would be better to pay more for a property that requires less attention.

Before you purchase any property, take the time to have it inspected. Even if you have inspected the property on your own, you should still have a professional go over the property to be certain that the electrical wiring meets code, there is no lead in the paint and that overall, the property is safe. An inspection can sometimes turn up problems which you might not notice but which could ultimately cost thousands of dollars to correct. You will typically be required to pay for the inspection; however, it is a wise investment that could save you quite a bit of time and money.

Take the time as well to research the local real estate market and the neighborhood. Check with the local police department to find out whether the area is safe and if you will need to provide any additional security. Drop by city hall to determine whether there are any plans for the local area that could potentially lower the value of the property. Research the real estate market in the area to find out the condition of prices. If prices have gone down recently, this could be an indication that rents will also be low. On the other hand, if home prices in the area are high, this could indicate the area is in demand that you may be able to charger higher rents.

Finally, do not make the mistake of 'settling' for a property simply because you are in a rush to invest in rental property. This could result in an investment that will require you to spend more time and/or money than you originally planned and detract from your profit margin.]]> http://www.mortgagematchmaker.ca/2010/12/guide-to-finding-the-right-investment-rental-property/feed/ 0 http://www.mortgagematchmaker.ca/2010/12/home-buying-basics/ http://www.mortgagematchmaker.ca/2010/12/home-buying-basics/#comments Tue, 21 Dec 2010 10:53:01 +0000 http://mortgagematchmaker.ca/?p=597 If you are interested in home buying there are some basics that will help your situation in more ways than one. The fact of the matter is that although some people see home buying as a long hard process, you can actually have fun with this if you know what you are doing. The key to having a good time when buying a home is to know what you are doing. This is why you should become familiar with all of the basics before you ever get started. The more information that you know up front the easier things will be on you as you move forward in the buying process.

One of the most important home buying basics is to know where to look for your new home. If you do not have a clue on where to do this, you will never be able to find a home that is perfect for you. Luckily, you can search for new homes in the newspaper, online, or by simply driving around looking for sale signs. If you put time into all three of these ideas you will surely find a home that suits your needs.

Another important home buying basic is how you are going to pay for your purchase. After all, if you do not have the money to buy a new home you are not going to get very far. There are many financing options that you should consider so make sure that you look into each one as closely as you can. Not only should you look into how you can finance your purchase with the different types of mortgages, but you should also consider you down payment. Remember, the more money that you put down on your home the lower your monthly payment is going to be. And of course this is a good thing.

Finally, if you need any help sorting out the home buying basics you will want to get in touch with a professional such as a real estate agent. They will be able to help you find a home, get a mortgage, and answer any questions that you may have. Although you may want to do everything on your own, having a real estate agent on your side comes along with a lot of benefits.

Gain as much knowledge as you can about home buying basics so that you can make this process as easy as possible.

Home buying can be a tricky process. Here are some home buying terms that you will most likely encounter as you purchase your home. Familiarizing yourself with these home buying terms will help you make decisions regarding your purchase.

Amortization

This is a schedule that outlines your loan payments for the duration of the home buying loan. It details how much of each monthly payment goes toward the principal and how much goes toward the loan. Initially, the bulk of your payments will be applied toward the interest.

Appraisal

Generally paid for by the home buyer, the appraisal provides an estimate of the property's worth. Required by most lenders, it must be performed by a licensed appraiser before your home loan will be approved.

Buye's Agent

A buyer's agent, as opposed to a seller's agent, represents only the interests of the home buyer. For an agent to be considered a buyer's agent, an agreement must be made between the buyer and the agent. Without such an agreement, the agent could end up representing the seller in a real estate transaction.

Closing

This is the final step in the home buying process in which the transfer of the deed is made from the buyer to the seller. The mortgage is also finalized at this point.

Closing Costs

These costs are required to be paid at the time of closing. Closing costs are usually between 3% and 5% of the price of the home and include such fees as loan origination fees, attorney fees, and recording fees. As part of your home buying negotiation, you might get the seller to pay some, or all, of the closing costs.

Earnest Money

Along with an offer, buyers can make a deposit on the home to demonstrate the seriousness of the offer. When an earnest money deposit is made, it is held by an escrow until closing. It is then added to the down payment.

Escrow

Funds held before closing by a third party, usually including the earnest money deposit. Future taxes and homeowners insurance, held by the mortgage company after closing, are also considered escrow.

FSBO, For Sale By Owner

This term refers to property that is being sold without a real estate agent. FSBO is also used to refer to the home owner who is selling the property.

Foreclosure

The process after home buying is complete by which a lender repossesses and resells a property after the owner has defaulted.

Lien

This is a legal claim that keeps the property from being sold until the lien is paid off.

Loan Origination Fee This is the fee charged by the lender for processing the loan. The loan origination fee is due at closing.

CMHC

When you make a down payment less than 20 percent of the loan amount, the home buying lender requires you to pay private mortgage insurance. This insurance protects the lender if you default on the loan.

Title Insurance

This insurance protects your title from claims against it.

Keep these terms in mind as you go through the home buying process.]]> http://www.mortgagematchmaker.ca/2010/12/12-home-buying-terms-you-should-know/feed/ 0 http://www.mortgagematchmaker.ca/2010/12/home-equity-line-of-credit/ http://www.mortgagematchmaker.ca/2010/12/home-equity-line-of-credit/#comments Sun, 19 Dec 2010 10:49:33 +0000 monty http://mortgagematchmaker.ca/?p=593 Having equity in your home is beneficial in more ways than just ownership of your home. Of course equity signifies that you are well on your way to owning your home free and clear. You should take a great sense of pride in the progress you have made toward owning your home. Many lenders allow you to take advantage of equity you have in your home in the form of a line of credit.

Many homeowners are using what is known as a home equity line of credit to borrow from the equity their homes for various reasons: taking a summer vacation, financing home improvement projects, paying off other consumer debt, and a host of other reasons. You can use a home equity line of credit in a manner similar to what you would use a credit card for. The major difference in that you receive a higher spending limit. The cost of the higher spending limit is your home.

A home equity line of credit, commonly referred to as HELOC, is fairly easy to obtain given you are credit worthy and have equity in your home. In many cases, you are able to receive low interest rates and other perks for obtaining a home equity line of credit. You are typically able to borrow up to 85% of the appraised value of your home less what you still owe on your home. For example, if your home is appraised at $100,000 and you owe $30,000 on your home, you can qualify for a home equity line of credit up to $55,000.

Obtaining a home equity line of credit is not much different from obtaining a mortgage. In fact, when you take out the line of credit, you are subject to many of the same closing costs as your initial mortgage. For example, when you close on your home equity line of credit you might have to pay an application fee, appraisal fee, attorney's fees, title search, and points. As with a mortgage, negotiating these fees is key because ultimately the cost of your home equity line of credit is increased because of the fees. Ask your lender to detail the costs you are being asked to pay so you can better determine what to negotiate. Then, ask that one or more of the fees be eliminated or reduced.

You might be subject other continuing fees with your home equity line of credit. Since these fees vary by lender, you should inquire about them before obtaining the line of credit. Typical fees associated with a home equity line of credit include membership fees and transaction fees. These fees, as with the closing costs, increase the cost of your home equity line of credit.

As with mortgages and other loans, you should shop around for the home equity line of credit that has the best terms for you. This includes the interest rate you are charged, associated fees/costs, and repayment terms. Use each of these factors to make a decision on a lender.