Investing in real estate is lucrative and attracts investors from all parts of the globe. However, many shy away from this type of investment due to the vast sums of money involved. Do you want to invest in real estate and lack the finances to do so? Nowadays, you can easily secure a loan and venture into the competitive industry. There are also different types of loans to consider.
Check out the distinct types of real estate investment loans:
Table of Contents
1.Hard money loans
This type of loan is awarded to real estate investors and is secured using real property as collateral. In this type of lending, the lenders are less concerned about your ability to pay or employment history.
Also, your credit score isn’t critical. What matters most to the hard money lender is the value of the income of the property that you intend to buy. Hard money loans are handy for real estate investors. They are also quicker to apply compared to their conventional mortgage counterparts.
2.Conventional mortgage loans
Conventional mortgage loans are popular loan options for property owners. They are home buyer’s loans that aren’t offered or secured by government entities. You can get a conventional mortgage loan from private lenders like;
- Banks
- Credit unions
- Mortgage firms
The loans are also governed by regulations that the federal government doesn’t back. However, the process of application varies between states, and here are qualifying regulations for all borrowers. For instance, some states require that you pay a 20% down payment equivalent to the property’s income purchase price.
3.Private money loans
Private money lenders are different from hard money lenders in that that they aren’t professionals. Instead, they are individuals with extra money and seeking a good return on investment. These can be friends, colleagues, family friends, neighbors and any other person within your social or personal network. They are handy for an investor whose loan applications were turned down by other lenders.
4.Fix and Flip loans
These are short-term loans given to investors for property renovations or upgrades. The loan aims to assist the investor in selling the property faster. Can I tell you more? Fix and Flip loans are a type of hard money loans and are secured by the property in question. If you’re in the house flipping business, you can approach any hard money lender and apply for this type of loan.
5.Home equity loans
Home equity loans allow borrowers to borrow against their home’s equity and use the money to buy another home or an income property. Most lenders offer homeowners about 80% of the home’s equity value. To qualify for this loan, the lender checks your credit score to determine your creditworthiness. The application process is easy, and the interest on these loans is tax-deductible.
Final thoughts
You can get a real estate investment loan from savings banks, commercial banks, credit unions, finance lenders, and loan associations. Choose the most suitable type of loan for your needs, and understand the interest rates and many other additional charges. This way, you avoid costly mistakes and get the best financial aid for your needs.