Most people
have little knowledge of how mortgage lending works.
For this reason they think they cannot get money for a second home
or to buy the vacant land that they want. It is actually quite
easy to borrow money for investment property. The following information
outlines various lending institutions and their capabilities.
Mortgage Brokers
are private business entities that broker or sell loans for lending
institutions. This means that a broker, after he understands
your needs, searches all the available programs to find one
that fits your needs. All brokers use the same money, meaning
they generally have access to the same kind of programs. Brokers
deal with large nationwide mortgage companies. All of these
mortgage companies have similar underwriting requirements for Fannie
Mae or Freddie Mac loans (government insured loans). These
loan requirements are for conforming properties. Conforming properties
generally consist of a conventional house on 5 or less acres
with power and phone. If the property has more than 5 acres the
lender will generally not give full value to the portion of land
in excess of the 5 acre limit. Why does this matter? This matters
because in the Wet Mountain Valley there are many properties that
have a house on more than 5 acres and the lender will not give credit
for the additional land. This means that the lender will not
appraise the property for it’s full value and will not loan the
maximum amount (LTV or loan-to-value) that the buyer needs or wants
to purchase the property. For a conventional house on 5 acres
or less Mortgage Brokers work fine. However, for properties that
are less conventional including solar powered homes or homes on
large acreage a private bank is a better lending choice.
Outside banks
are the banks that perform all of your daily banking needs.
This is where most folks should start the mortgage process.
All banks do business differently. Some have flexible lending
requirements and others are rigid. Consult your local bank. They
may have good lending options for mountain properties or they may
not. Just ask and find out. Remember, if you want a loan on a home,
describe the home in detail so the bank can give you and accurate
answer.
Local lenders
in our area are THE BEST BET for buying property in our area. They
deal with mountain property every day and have loan programs for
all types of mountain property. Local lenders are who we send
our clients to when they ask where to go. The reason for this
is that we want everything to go smoothly and this is the easiest
way to insure that it does.
How much money
do I have to put down? This is a common question with regard to
buying property. The answer is generally a simple percentage,
but it is different for each type of loan and circumstance.
For improved property (residential) the percentage is somewhere
around 5% to 20%. For vacant land, local banks require 25% to 50%
down. Some lenders require the property have power and phone
available before they will lend money. This is something to ask
when choosing a lender.
Another financing
option is to borrow money on your primary residence in the form
of a home equity loan or line of credit. These type of loans usually
have the advantage of a much lower interest rate and are easier
for the banks to process which means less paperwork, time, and trouble
for you. This option makes most sense for people with plenty of
equity in their primary residence. In fact, for homeowners with
significant amounts of equity in their primary residence, it may
be possible to get a loan that covers the full purchase price of
the investment property. This means no down payment will be
required!
Before shopping
for property, either vacant land or an investment home, it is good
to know how much you qualify to borrow and how much you are able
to provide for a down payment. This information will help make your
property search go much easier!
Please
contact us for more information.
info@mountainlandproperties.com
719-783-0563
