Types of Multi-Family Financing: Rates, Terms and Qualifications

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Multi-family properties can be a great way to enhance your finances. They can be a valuable form of income. Of course, it is essential to get the right financing for your building. Whether you need a mortgage to buy a new investment property, an estate loan to buyout siblings on an inherited property or any other type of financing, it is important to understand your options.

Conventional Mortgages

Conventional mortgages on investment properties are a lot like the mortgage on your home. They are typically used for a building that does not require significant renovation to be rentable. The loan is based on the market value of the building.

As conforming loans, conventional mortgages adhere to the standards set by Fannie Mae. These are in place to help protect both lenders and borrowers. If you are expecting to own a rental property for a long time, this may be the right option for you.

Expect to require a 20% down payment. Conventional loans carry 15- or 30-year terms and have interest rates between 4.88% and 7%, typically. You will likely need a credit score of at least 680 to qualify.

Hard Money Loan

A hard money loan can get you financing for properties that wouldn’t qualify for a conventional mortgage. For example, you can use one for a fix and flip or for a building that needs significant renovation to be rentable.

This type of loan is also available if you wouldn’t qualify for a conventional mortgage. The credit score required is much lower, around 600. However, it is worth noting that interest rates, terms and qualifications all vary depending on the lender.

You may be familiar with some of the hard money loans California residents use to make money on the booming real estate market. You may be able to pay a much lower down payment and can potentially get a term as short as a few years. However, expect these loans to have higher interest.

Short-Term Financing

If you have an opportunity that you want to move quickly on, bridge loan companies may be able to help. This form of short-term financing can get you a loan for as little as six months. The funding time is much faster, sometimes as little as 10 days.

People use this type of loan to quickly make an offer on a property while still getting together the cash to pay a down payment on it. It can be relatively expensive with interest rates in the double digits. However, short-term loans can also help you make a lot of money by moving quickly on the right opportunities.

Expect to pay original fees and other costs with a bridge loan. You may need some previous experience in the market to qualify for this type of loan. However, the credit score requires can be as low as 550.

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There are plenty of ways to finance your multi-family property purchase. Understanding the different types of loans can help you get the right terms for your needs. Learn more and take the first step toward realizing your real estate goals.

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Financing Options for Small Businesses

Small business owners sometimes find themselves unable to take advantage of opportunities because they lack the necessary financial resources. This often puts them at a disadvantage especially when they have to go against bigger corporations with deeper pockets. One solution that could put them on equal footing with big leaguers, at least in terms of funding, is a business loan. There are institutions that provide various financing options for small business owners. The fund from these business loans can be used for various business purposes including expansion, building construction, equipment purchase, and purchase of inventory. As each business would have different financing needs, it is necessary for the business owner to consult with a financial advisor or a financing consultant to determine exactly what kind of business loan he should avail of.

small business financial options

To get the best possible financing package, small business owners would have to ensure that the company is in good financial condition. They might not have much in capital, but their books should show that they are not on the red. Business plans are sometimes required by the financing company to determine the extent of risk that they are taking on when they lend money to the company. These plans should show how much the company is expecting by way of revenues in the coming months and years. The better the prospects are and the more realistic the projections look, the more likely the business owner will get the loan package he is applying for.

Financing options come at a cost. Business owners have to pay these loans back with interest. It is, therefore, not wise to get a loan unless it is absolutely necessary. There should be a clear purpose for the money that will be borrowed. And, the purpose for which the money would be used for should yield revenues that exceed what the borrower would have to pay in interest. Otherwise, the businessman would not benefit from such a financing package. Diligent and realistic number crunching is recommended before a businessman takes on financing options.

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