A Look at the Common Types of Real Estate Financing A lot of people today want to invest in real estate. Real estate accounts for a safe investment option that can help in diversifying your investment portfolio and leveraging your capital. A lot of first-time buyers are entering the market today and this has resulted in multiple people seeking real estate loans for investment purposes. Getting the right type of loan can help in boosting your purchasing power and cash flow and also increase your return on investment. Here we will have a look at the common kinds of real estate financing and how you can utilize them:
Portfolio Loan People that face hassles in meeting the requirements that accompany a conventional loan can consider portfolio lenders. If you are buying a property that
does not fit into the categorical norms or you do not have an acceptable credit rating, then you can consider going for this loan. Portfolio loans account for mortgage loans that are held in the portfolio of a bank. The loans are sold on the secondary market and they don’t have to comply with the guidelines set by investors of the secondary market. Conventional loan In case you move into a house that does not need any repairs and you have a good or fair credit, then a conventional loan will be well suited for you. Conventional mortgage loans consider the credit score, income, assets and debt of the borrower. Buyers are generally required to make 5 to 25 percent down payment of the buying price. Conventional loans are needed to meet strict guidelines before they are issued. Hard money loan These loans are generally utilized to purchase properties that are in poor condition and in requirement of repairs. Compared to conventional mortgage loans, hard money loans are sponsored by funds from wealthy investors or private money from individuals. The requirements of this loan is less regulated and these can be secured quickly. Owing to the quick turnaround time of hard money loans, a lot of real estate investors seek them out. These loans can be used for industrial real estate financing. The rate of interest of hard money loans is greater than conventional loans. Blanket loan Blanket loans are utilized for funding more than one property, land or bigger tracts that ultimately will be split and sold. Real estate developers and builders generally seek these loans as an alternative to individual loans for multiple properties or distinct parcels of land. In case you want to finance multifamily properties like commercial residential properties of five units and above or multifamily properties of two to four units, you can utilize multifamily property loans.