For many people purchasing their first investment property can be overwhelming. You will have many mortgage options depending on what your plans are for the property. Some of the important questions to ask yourself are:
1. How long do I want to own the property?
2. Are there any improvements needed before I can flip it, or find renters?
3. How much money do I have to put down on the purchase, or for repairs and upgrades?
4. Am I financially able to make the payments if I do not sell it in the timeframe I anticipate, or cannot find renters right away?
Once you have answered these questions your mortgage consultant will be able to present you with mortgage options that address your concerns.
The easiest way to purchase an investment home is to keep your current home and turn that into an investment property when you are ready to move or upgrade to a bigger home. This way you still have great rates and financing from your existing home loan because it was an owner occupied property when you last financed it and now you can rent the home out. You can still get the same great financing on your new home because this will be an owner occupied property. Once you have one investment property it is usually much easier to buy another. You can use the equity in one of your homes as a down payment and possibly to pay for the new home in full.
One popular mortgage for investors is the Pay Option ARM. Generally, this loan has several payment options every month including a payment that is so low it increases your balance by deferring some of the interest. If you plan to purchase, renovate, and flip a home all within a few months then you should ask your mortgage professional if a pay option ARM is right for you.
A rehab loan is a great option for investors seeking to improve their property immediately upon purchase. A rehab loan provides the funds to purchase your home and the funds rehabbing all in one loan. There is only one application, one set of fees, one closing, and one convenient monthly payment.
Do an online search for foreclosure listing, bank's REO inventory and HUD's foreclosed property listing site. Most of the time, the houses on these sites are under the fair market value. Thus, as soon as you purchase the property, you would have already built up some equity.
The amount of cash required to buy an investment property will depend on your credit history. If you have excellent credit there are lenders that will allow you to borrow up to 100% the value of the property.