Alternatives to Fannie Mae Financing
Entrepreneurs in the real estate industry often turn to Fannie Mae so that they can enjoy low rates and simple terms. This path is great for many people but won’t make sense for every situation.
For example, it won’t work in your favor if you need to get more than 10 loans at once, so you will need to discover the other lenders from which you can choose if turning to Fannie Mae is not a viable option. Reviewing each one will help you choose a path that makes sense for your goals and budget.
When they need money to fill the gap between transactions, people often turn to bridge loans, which can seem like a smart option from the surface. Most people know about the high-interest rates but expect to pay the loan off promptly. If your deal falls through or you face the unexpected, you can get stuck with unreasonable rates that you will want to avoid. In addition to high-interest rates, bridge loans also come with unreasonable closing costs that can put a dent in your bottom line.
Rental Property Loans
Rental property loans are a great choice for those who want to borrow money without facing unfair terms. You might feel tempted to avoid this path because you will still need to pay premium interest rates once you sign the paperwork, but you must take a closer look if you would like to get a clear picture of what to expect. The benefit is that you can get a 30-year loan at a fixed rate, allowing you to avoid hidden charges.
Depending on your situation, you can even buy down to enjoy even better rates for the first few years or the life of your loan. Although the lender will still look at your credit history, the property’s projected performance will have the most significant impact on your eligibility.
If you are interested in buying and closing several properties at the same time, consider the pros and cons of portfolio loans. Choosing this path will allow you to use a single loan for multiple properties as long as you buy them from the same company. Investors who want the option of paying their loan off before the agreement ends won’t find this path appealing because they will need to pay a termination fee. Also, you won’t be able to sell or transfer any of your properties until you pay the loan off.
Some investors turn to private banks when they want to take out a loan, and doing so can work wonders in some cases. You must keep in mind that private banks aim most of their loans toward individuals, so they won’t always offer attractive incentives for investors. People who have put in the effort and time to build relationships with private banks will get the best possible deals.
Fannie Mae is a wise choice for investors who meet the requirements and need 10 loans or fewer, but others don’t need to get discouraged. Doing some research and asking the right questions will help you uncover a range of lending options that can work for your business and improve your bottom line.