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Archive for February, 2011

When buying real estate, it’s important to remember that all purchases of real estate are essentially investment properties. What will matter most when buying real estate for investment is what the objectives are of the purchaser. Rental properties, specifically, generate regular income, and, in this market, can be ideal right now-if the investor takes time to consider these four possibilities:

#1 – Choose the Right Location
The ideal location for rental properties is where the population is dense. Look for areas near colleges and universities, accessible to public transportation options, and close to activities such as shopping centers, cultural events, and the like. Renters with children typically wish to be in areas that have good schools, and safe neighborhoods, so choose an area that is close to the best schools, private schools, or have a great deal of activity and population density.

#2 – Sound Financial Planning
In order to take advantage of the buyer’s market, ensure that there is enough capital to handle typical investing risks. There’s no need to stop at working with lenders. Lenders can be very helpful with understanding financial goals, but they’re just for starters. Discussing options with a financial planner can help increase capital to pay for many potential obstacles. It is also important to try to have at least six months worth of mortgage payments on hand to cover repairs, maintenance, or transitional periods where the house is between renters. Buying real estate for investment is just the beginning; knowing the investment hazards and being prepared to avoid them will help make the most out of any investiture.

#3 – Consider Property Management
A property management firm can assist in the daily rental issues that occur, and having a maintenance team on board can ensure issues are taken care of before they become problems. Moreover, consider expanding the property management team to include an attorney to handle legal issues, and an accountant to assist with finances and taxes. In this case, more really is better, as a good team can work ahead to foresee potential issues that could become headaches if not handled immediately.

#4 – Choose Experienced Partners
When just starting out in investment properties, it’s a good idea to partner up with an experienced real estate agent, who knows about buying real estate specifically for rental and investment properties. A good broker will assist their clients with sound recommendations and advice, because they want repeat investors. They look to seek relationships with investors over the life of the investment, and are always able to help search for growth opportunities.

Now is a great time for buying real estate to turn into an investment property, particularly rental properties. This is specifically true for rental investments-with good tenants there is the promise of steady income and gains. By keeping these four tips in mind, foreseeable pitfalls can be avoided. With market prices being as low as they are right now, getting in on an investment property is ideal.

Many borrowers today are frustrated about the fact that they can’t obtain a mortgage loan. The application process has become tougher and many people including those with good credit scores have been declined for loans. Reports from the Federal Financial Institutions Examination Council revealed that one in four mortgage applicants were rejected in 2010. The figure is up by 18 percent from the number of people denied mortgages in 2003.

But government officials clarified that lenders have money to loan to people. It’s just that their standards have become stiffer. As such, it should be the responsibility of borrowers to know the criteria required in order to successfully obtain a mortgage particularly those supported by the government-run mortgage lenders, Fannie Mae and Freddie Mac.

Lenders today are particular about the applicant’s ability to provide the 20 percent down payment. This is in addition to the closing costs.

Another important factor is a good credit score. The minimum credit score borrowers need to meet is 620. So make sure you get copies of your credit report to find out your history. And should there be errors or problems, do take action to correct them right away.

The applicant’s income is also very important. This will show your financial capability in making your payments moving forward. Keep in mind, however, that only up to 28 percent of your income should be allocated for the housing costs. Having a steady income then should give you a good chance of getting a mortgage for that home you want to buy for your family.

Lending institutions also look for a loan-to-value ratio of 80 percent. This means, they prefer a home value that is greater than the mortgage balance. The reason behind this is that in the event the borrower defaults from his payments, the bank will be able to sell the residential property and recover the loss.

These four criteria are best followed if you’re obtaining a loan backed by Fannie Mae or Freddie Mac. If, however, you can’t meet these criteria, don’t lose hope because you can always approach the Federal Housing Administration (FHA).

FHA-insured loans are not that hard to obtain. The agency’s standards are flexible so getting a mortgage is easier. The minimum credit score borrowers have to meet is 580 to qualify for a loan that requires a 3.5 percent down payment. A credit score of 500 is enough to qualify for a loan requiring a 10 percent down payment.

The FHA also explained that they can accommodate borrowers even with negative issues in their credit score. What matters is for the most part, the borrower is able to provide proof of a stable income and the ability to correct those past mistakes that tainted their credit history.

On the whole, obtaining a mortgage loan is still possible as long as borrowers take the extra effort to follow the standards and maintain a stable financial status moving forward. Having the right attitude towards your financial obligations is really essential these days.