Property investing is one of the most important and crucial decisions of one’s life. Home financing rates have dipped, and there are many investment opportunities in property.

Those considering buying their dream house must have many things in place, such as mortgage plans, property tax, dwindling interest rates, credit history, and other endless paperwork.

How to finance property investing
Property investment requires a long-term commitment. Ask yourself, are you ready for a roller coaster ride till your mortgage is paid off?

Check your credit history
If this is your first property, keeping your credit profile in shape will make your work easy. A credit score lower than 740 signals trouble waiting for you ahead. Financing companies charge fees to maintain the same interest rates for borrowers with low credit scores. Fees can vary from a quarter point to two points. You can check your credit profile from websites such as Equifax and Experian. Before applying for a loan, consult a credit history expert who can guide about how you can improve your credit score to avail a loan without any difficulty.

Make a large down payment
Property owners generally ask for 20% of the property value as down payment. If you can afford more down payment, you may secure a better interest rate. Remember that mortgage insurance is not an option for investment. If you cannot afford down payment, the only way out is to sell your old home. Once you have cleared the down payment route, the remaining process of financing is easy.

Narrow down your search
Once the first two steps are sorted, start looking for a property that fits your budget. Consult your tax advisor about why you need financing or what is the purpose of financing in property investment. Whether you are planning to use the property or rent it, understand the tax implications.

Consider REIT
REIT (rental estate investment trust) is another option to consider. REIT is a public or a private company that borrows money from investors for purchasing and leasing real estate. Investing in a REIT is as good as owning real estate, wherein the investor can enjoy steady quarterly dividends.

Opt for fixed interest rates
You will have the option of choosing between a fixed rate and an adjustable rate mortgage (ARM). Choose the fixed interest rate, which will remain constant throughout the repayment period. On the other hand, an ARM will offer fluctuating interest rates. Although an ARM has lower interest rates initially, the rate increases as the repayment term increases.

Look for lease with buy option
The lease-to-buy arrangement or the rent-to-own option is a good way to invest in real estate. This arrangement provides you with some time to look for financing options and improve your credit score before you go for a mortgage.

At times, when investors are facing difficulties with arranging finance from banks due to low credit scores and other formalities, private financing can help them purchase real estate without much hassle. However, they must conduct extensive research and compare different financing options before making a decision.