When you think of financing your investment property, the first thing that probably comes to mind is a mortgage. However, there are many different ways to finance your real estate investment, and not all of them require a traditional mortgage. Here are ways of finding and using various types of financing for your next purchase or refinance.

Buy a Property With an FHA Loan

An FHA loan refers to a mortgage that the Federal Housing Administration insures. This means that if you default on your loan, the FHA will reimburse the lender for any losses they suffer. Because of this guarantee, lenders are more willing to offer mortgages to borrowers who may not otherwise qualify for a loan.

There are several benefits of using an FHA loan to purchase a property:

• You can buy a property with as little as three percent down.
• The interest rates tend to be lower than those offered on conventional loans.
• FHA loans are available to borrowers with credit scores as low as 500.

If you’re interested in using an FHA loan to finance your real estate investment, be sure to consult with a qualified lender.

Crowdfunding

Crowdfunding is a newer way to finance your real estate investment. It involves raising money from many people, usually through the internet. Investors can choose to invest as little or as much as they want. Crowdfunding platforms have exploded in popularity in recent years, and there are now dozens of them to choose from. You can check out other sources for DiversyFund reviews for more information on crowdfunding platforms.

One of the most significant advantages of crowdfunding is that it opens up investment opportunities to people who may not have access to traditional financing methods. For example, someone with a low credit score may still invest in a property through crowdfunding.

The disadvantage of crowdfunding is that it can be challenging to find high-quality deals. Most platforms only list investments that meet specific criteria, so you may not have many options to choose from.

Hard Money Loans

Hard money loans are a financing option for real estate investors with poor credit or high debt. Hard money lenders will loan up to 70% of the property’s purchase price on average, but it’s important not to get in over your head when borrowing from them.

First off is determining if you’re eligible and then applying for a hard money loan. This is done by providing your lender with an application that asks about your income and assets and how much they want to lend you per month in addition to what kind of properties interest. If approved, expect between 12-24 hours before receiving their answer, so be proactive.

Once given the green light, please work with your real estate agent to secure a deal and work with their team to draft the contract. Next, have your title company draft up all legal paperwork for the loan before having an attorney look over it. Once they’re satisfied, you’ll be able to close on the property within around 30-60 days max depending on lender requirements.

Conclusion

Financing your real estate investment is an essential step to take when starting your real estate business. There are many available methods of funding your investment, but you need to make sure that the method works best for each situation.