Here’s what you should know about financing investment properties...
- First off, always ask your friendly neighborhood mortgage broker how many investment properties they have actually closed on. You are looking for experience. Let someone else work in a beginner. Not you, it’s not worth your time or your money.
- Second, ask the mortgage broker to send you the fine print.
Ask for the details of the mortgage program for financing investment properties. Check that the interest rate on the mortgage program doesn't have any clauses about increasing the interest rate based on your down payment amount.
I've seen brokers offer mortgage programs without fully understanding the program. You should know that these mortgages for financing investment properties are hyped and sold to the brokers just like anything else...with salespeople and marketing flyers. Some of the marketing material may highlight a certain interest rate. But the fine print may state that your credit score must be above 650 AND the down payment must be 15% to qualify, not 10% as you anticipated.
Now let me be clear, I don’t think there's any malicious intent in these situations. There’s fine print in every deal, whether it be a car purchase or a commercial lease or financing investment properties. However, if your banker or mortgage broker hasn’t been through any investment mortgages they may be totally unaware of these critical points. So take it upon yourself and ask them to email or faxyou the details of the mortgage program.
- Lastly, know your credit score. You can pull your credit score from Transunion or Equifax and it will not affect your score. When you pull your credit score yourself it's called a 'soft pull'. Your credit score plays an integral part in getting any mortgage and it's amazing how many people don’t know their own score. You may think you have perfect credit, but, and I've seen this, you forgot to pay a $20 VISA card bill 6 months ago and your score drops from 660 to 610 and you now no longer qualify.