Avoid Financing Issues

Nothing is more frustrating or heartbreaking than finding that perfect property and applying for the loan, only to find just before the closing date that the loan terms have changed. It happens more often than you might want to believe, and the results can destroy any return on investment you might have received. If you have had this happen before, then you already know the cash flow will dry up immediately, without ever giving you a chance to make a profit from your investment property. If you think this all sounds counterproductive, you would be correct. With the right questions and specific preparation, you can keep these things from happening, but it’s a commitment you must see all the way through.

First of all, work with your local mortgage broker, even if it’s just to ask for referrals. You need to work with a lender who has plenty of experience with investment properties, and if your local lender truly wants to help, he or she will make sure you get the connections you need. This is your livelihood, so don’t take a chance with a beginner, no matter how badly you want to help them out.

Next, you should be sure to always read the fine print. You need to know exactly what type of loan you’re getting and what the interest rates will be. There should be no surprises on the day, so be sure you get everything locked in before you reach the closing table. One thing to watch for is the interest rate in relation to the down payment you plan to make. In some cases, you could find your interest rate is higher than stated if your down payment is smaller than necessary. It is vital that you understand your chosen mortgage program before you commit to anything.

Finally, know your credit score. If you aren’t fully aware of your credit score when you fill out the application, you could get a nasty surprise when it comes time to decide the interest rate. Once you have applied for the mortgage and have been approved, don’t make any large purchases. Some people purchase a house and then do something to celebrate. What they don’t realize is that their cruise or their new car dropped their credit score, and they get a nasty surprise on closing day when the interest rate goes up so much that affording the property is no longer an option.

By: Ken Boutilier

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Ken Boutilier is an Atlantic Canadian based real estate investor, trainer, speaker, consultant and entrepreneur who has combined his knowledge of real estate investing and Internet marketing to train and teach others how to increase their cash flow through successful real estate investing. Learn more at Real Wealth Atlantic.