Choosing Between Conforming Loans And Traditional Mortgages

A rental property loan is basically an first lien loan secured by an occupied vacant property instead of by an owner occupier. To qualify, the real estate owned by the tenant must be free of liens, except for taxes, for at least two years. Typically the tenant is usually long term, but short term rental properties can also be utilized, like vacation rentals. It can also be used by investors to take advantage of declining housing prices. The loan can either be in form of a fixed-rate mortgage or an interest-only loan. Interest only loans deduct a small portion of the interest rate from the principle.

In the past, the only real option for investors to obtain financing for a rental property loan was to apply to banks and credit unions. However, today there are a number of private lenders available for investors to choose from. These private lenders usually charge higher interest rates and more restrictive terms than traditional banks. For this reason it is important for investors to carefully examine all the options available before making a decision.

The best way for investors to obtain a rental property loan for investment purposes is to work with an experienced, independent financial adviser who has extensive experience in working with investment loans. Many investors mistakenly go with the first lender they are approached by, or go with the first agency they meet with. This leads to a situation in which borrowers lose money, often because they did not look beyond the first choice. It is much better to take the time to shop around and find the best alternative lender or agency loans for your investment.

When you consider an investment loan for your rental property loan, you will want to consider a number of factors. One important consideration is your credit score. If you have a low credit score, you may be able to get additional risk and interest rate incentives from a high-risk lender or broker. Conversely, if you have a good credit score, you may be able to get a better interest rate and different terms from a low-risk lender or broker.

Another factor to consider when shopping around for rental property loans is whether the company or broker you are considering offers a no-obligation, or "no risk" option. Some investors opt for this option, especially if they do not have the time or cash to obtain traditional home loans. With this type of no risk option, the borrower pays nothing upfront, without the possibility of losing the home. If the value of the rental property goes down, the borrower makes no profit, but continues to pay the rental property loans until the property is sold. Read more about hard money loan requirements by visiting this homepage.

Conforming loans are another alternative to traditional mortgages that have become more popular over the past few years. These loans are actually quite similar to a traditional mortgage, except that the borrower does not make any payments until the home is sold. This allows borrowers with bad credit to get an affordable loan with favorable terms. Conforming loans are available from many traditional lenders, and they can sometimes be even more affordable than a no risk loan. Even if you have a bad credit history, conforming loans are available for you, and many investors choose them for their investment properties.

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