Housing is one of the best investments that you can add to your portfolio. However, you’ll need financial backing before you can buy a house or apartment–and if you can’t secure enough funds, you’ll have to start looking at other investments. The decisions that you make now could affect your ability to invest in the future even if it’s not related to housing. Before you get started, keep these tips in mind as you plan your portfolio.
1. Build a Good Credit Score
Whether you’re investing in property or buying a car, having a good credit score is essential. Stay on top of your credit cards, mortgages and other loans to ensure that you maintain your credit score. If your score is too low, you might not be able to secure funding for your investment.
Even a moderate-to-good score could affect your investment financing. If you have a score below 740, you might have to pay extra fees to keep your interest rate consistent. Check your credit score before you try to secure a loan, then spend some time building your score if you think it might affect your investment.
2. Visit Your Local Bank
Your first instinct might be to visit a major financial institution for a loan. They might offer the financing you need, but in certain circumstances, they might insist on a high interest rate or decline to give you the full down payment. Luckily, your local bank might be more flexible. Check out your local bank to see what they offer and learn more about investing in your area.
Since you’re buying property, you could also visit mortgage lenders in your area. They typically offer more loan options so you can find the right mortgage for your needs. Plus, they could offer advice since they’re familiar with the local area.
3. Try Other Methods of Financing
If bank loans or mortgages are out of reach, try another method of financing your investment. For example, you could cash out a life insurance policy to pay for your new investment. You could also look for a personal loan, although they tend to have different regulations. Other options include paying for your investment with a credit card or home equity.
4. Request Owner Financing
Some sellers are willing to loan you the money that you need to buy their property. However, you’ll have to prepare an agreement to show that you’re serious about investing in their property and paying back the loan. Most people are hesitant to give out personal loans, so you’ll need to show the seller that you have a history of smart investments.
5. Make a Large Down Payment
Most banks are more likely to give you a loan if you make a large down payment. When you make a large down payment, you’re showing the bank that you know how to manage your finances and take investing seriously. A large down payment also reduces the bank’s stake in the investment. This makes them even more likely to give you the loan–if it doesn’t work out, they’ll lose less money in the process. Ask your bank how much you need to pay to get a lower interest rate.