Be Well Informed Before Shopping For Loan
REM #F663
By Ilyce R. Glink
Summary: Zero-down financing is becoming the new strategy for financing investment property. Ilyce explains what questions you should ask a lender before signing on the dotted line.
Q: In a recent column, you were discussing the purchase of investment properties
with one to four units.
Both Fannie Mae and Freddie Mac allow an investor to put as little as 10 percent down on these sorts of investment properties.
Any mortgage lender who sells to either Fannie Mae or Freddie Mac should be able to provide this type of financing. There are points that are required, and the amount is based on loan-to-value ratios and credit scores.
Also, there are several large wholesale lenders that offer zero down financing
for investment properties. The selection of products is limited, and the rates
and fees will be higher than normal, but they do exist.
A: Thanks for your comments. I'm often asked about "zero down" financing
for investment properties because so many people read books like "Zero
Down for the 2000s" or any of the other dozen or so titles that talk about
financing investment real estate with little or no cash.
Thanks to electronic automatic underwriting software programs, like Fannie Mae’s Desktop Originator, and the vast numbers of creative financing techniques that have been developed over the past few years, almost no borrower is refused a loan.
If you’re planning to buy an investment property, the questions you should ask your loan officer include: How much will I have to pay each month? How much will I pay when (or if) this loan converts? What kind of credit will you give me for the rent I collect on this property? Is this a negative amortization loan and if so, how much will I owe on the loan balance when the super-low interest rate expires?
Being well-informed is a much more intelligent way to shop around for the right
loan.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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