Investing in real estate is an ideal way to create a path to financial stability. Not only is real estate investment a worthwhile endeavor, but done right, it can be a lucrative one. However, getting started without a foundation of knowledge can make the process precarious. This is especially true regarding financing real estate. Chances are – unless you’re independently wealthy – you’ll need to finance your initial investments. Loan applications and subsequent processes can trip up even the savviest of investors, so consider a few tips to get started before you apply for a real estate loan.

Check Your Credit

Even if you’ve established a real estate investment business, your personal credit is still the key to financing real estate endeavors. Before you apply for a loan, determine where you stand from a credit perspective. Check your credit score and report to determine if there are any red flags that might cause a loan denial. Since every inquiry on your credit can negatively impact your score, it’s best to minimize the number of times you apply. If you know what areas need a little work in advance, you can take care of those blemishes before you apply. A credit score of at least 740 will get you the best loan terms.

Pay Down Debt

You’re a more attractive candidate if your debt to income ratio is healthy. An extraordinary amount of doubt represents a risk that many lenders may be unwilling to take. If you know you’re interested in financing real estate for investment, take the time and financial resources to pay down bigger debts and ensure that your debt is less than 36% of your income.

Check Interest Rates

Interest rates are constantly fluctuating. Knowing the right time to jump in on financing real estate could mean the difference between paying thousands of dollars in interest and paying significantly less over time. If you don’t keep up with the markets, work with a financial planner who does. Savvier professionals know when the interest rate is likely to dip or rise. Apply for your loan when you can get the lowest possible interest rate.

Gather Pertinent Paperwork

Before you begin the loan process for financing real estate, gather pertinent paperwork for the lender. Besides your credit report, bank statements and tax filings, most lenders want proof of income and documentation relating to work history. Lenders will also need to see documentation proving your identification (driver’s license, social security card, etc.) and sometimes even proof of current residency.

Employment history is imperative. Lenders want to know you’re financing a loan you can afford to pay back even if investing will ultimately be your main source of income. Initially, a stable work history can make or break your ability to get a loan. Lenders require documentation that you’ve been in your current position for at least two years to ensure easier approval for a loan.

Prepare For The Down Payment

Depending on your financial circumstances, a down payment is likely a necessity for your investment. Prepare before you apply for the loan, so you’re not scrambling for cash at the last minute. Determine the potential price range of your investment and then amass a down payment accordingly. This also speeds up the loan process should you get approved and ensures that once you find a property in which you’re interested in investing, you don’t risk losing it because you don’t have your down payment ready.

Shop Around

Before choosing a lender, do your research. Assess big banks versus smaller lending houses. Read reviews. Ask around to anyone else you might know who’s financing real estate. Do your homework, so you not only choose the best lender but one with a sound reputation and excellent customer service.  While online reviews are the easiest way to determine a company’s reputation, industry publications and partners also provide sound insight. Other investors might have opinions about lenders and real estate professionals often have years of experience and industry relationships to back up their opinions on lenders.

Determine If Owner Financing Is An Option

If you’re wary about working with big banks (and many people are after the last market crash), then you might investigate owner financing for a property in which you’re interested in investing. While cautious owners automatically shy away from this proposition, others may be more willing to entertain the idea. If you have a property in mind, discuss this possibility with the owner. You never know what may happen.

Seek Pre-Approval Versus Pre-Qualification

Pre-approval means you can provide a lender with basic information that determines your initial creditworthiness for a loan. Pre-qualification means that the lender has levied a credit inquiry that will reflect in your score and on your report. Enough inquires can quickly drag your score down and impact your ability to get a loan. Focus initially on pre-approval.

Get Professional Help

The world of real estate investing can be a challenge. There’s so much information available, and it’s easy to become overwhelmed by it all. If dealing in large quantities is not your strong suit, or you want to be sure you’re making the right decisions before working with a lender, get professional help. A financial planner can guide your financial decisions as you prepare for financing real estate and help you protect your assets and your financial future.

Investing in real estate can make the difference between financial stability and utter financial ruin down the road. It’s one of the few ways to build lasting wealth with a market that’s constantly growing even if there’s some volatility to it. Educating yourself about real estate investing and taking the time to learn as much as you can before any money leaves your hands is a good way to ensure financial success.

One of the first steps to financial success is educating yourself on what to do before you ever hit “apply” on a loan application. This ensures that you’re as prepared as possible for the investment process.

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Enter your information below and we will schedule for a no cost and no obligation 30 minute strategy session with our team. We will discuss what your goals are and how we can help you achieve them faster!  If you like what we have to offer we will move forward if not then we will find something else that works for you!




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