Foreclosed Property Specialists

Getting The Best Financing For Investors

What you can do to get the best mortgage deal when buying a foreclosed property for investment.

With low interest rates and many attractive loan programs available today on residential real estate, now may be the perfect time to buy an investment property or even a second home. Be aware, though, lenders ask for larger down payments and charge somewhat higher interest rates for mortgages on non-owner-occupied properties. There's good reason.

Lenders consider investment property a higher risk than financing owner-occupied homes because investors have less to lose by walking away from an unaffordable investment than from leaving a home they live in. There's also a greater risk the owner could walk away should the property sit vacant for any length of time because an owner who relies on rental income to make the monthly payment can quickly run into trouble. In addition, some renters are known to not take care of properties as well as the owner who lives in it -- which over time can erode the property's valuue.

Here's what you can do to get the best mortgage deal when buying a foreclosed property as an investment:

  • Make sure your credit is in the best possible shape before making a loan application.

  • Find out what you can afford. Talk with several mortgage lenders to determine how much cash you'll need to purchase a foreclosed property, how much mortgage you can qualify for and what type of mortgage makes the most sense.

  • Ask whether the seller -- lender or government institution -- can provide your mortgage. If so, you may be able to get a lower down payment, a lower interest rate or easier terms.

  • Show the lender you can afford the payments without relying on rental income -- or that you will at least have enough cash set aside to weather several months of vacancy.

  • Make a sizeable down payment -- more than the 20-25% standard if possible. The more you have invested in the property, the less risky the loan looks from the lender's standpoint.

  • Demonstrate your ability to rent out the property by showing low local vacancy rates and proof that your rental amount is consistent with other rental properties in the area.

  • If the property has a consistent record of being rented, show that to the lender and be sure to let the lender know if a renter is already lined up for the property. The lender may consider a portion of the property's average rental income in their decision about how much to lend you.

  • Your lender will be particularly concerned about a foreclosed property's title being clear of any liens or other claims to ownership. Order a title search, or make sure the seller will deliver clear title, and ensure that any issues are resolved before proceeding with the purchase.

Let us help you gather the information you need to secure a mortgage on your investment property. It's just one of the many services we're happy to provide our clients.