Homeownership is a hotly debated topic, but one can’t debate the value of owning rental properties. As your portfolio grows, you’ll quickly find limitations in the service your bank provides.
Traditional home lenders specialize in traditional homes for one single-family home. As an investor, you’ll want to work with a lender that specializes in the unique situations you face. Here’s how to prepare and present yourself to blanket loan lenders.
Evaluate Your Income Sources and Assets
Before you start shopping for any financial services, it’s important to understand how much income you’re actually bringing in. According to the U.S. Bureau of Labor Statistics (BLS), the median personal income for full-time workers is $865.
If your income isn’t great, consider working a second job. It’s more common than you think.
Many people have side jobs working in the gig economy. In fact, 16.5 million people are currently working side gigs. Marketplaces like Fiverr, Upwork, Uber, and Postmates make it easier than ever to increase income.
On top of this, you can sell items around the house on platforms like eBay and Etsy. Cryptocurrency was profitable for early investors. You’d be surprised at how much the stuff you already own is (and isn’t) worth. It’s never a bad idea to check the market to see if it’s actually what you think it is.
There’s no shortage of outlets to add income and ensure you have the liquidity needed to buy an investment property with a blanket loan. For many lenders (we’re one of them), verifiable income can help you overcome just about any other obstacle you encounter. If you have a steady income stream, you can shop blanket loan lenders with confidence.
Analyze Your Current Spending and Debt
What’s just as important as income is spending. Debt payments take a chunk out of your income, so you need to be realistic about what you’re spending.
The number one reason people default on financial obligations is by not realistically accounting for real-life spending. We like to look at our lives with rose-colored glasses, but a blanket loan is a big responsibility. When the bill comes due, you need to be able to pay it. Otherwise, you’ll be defaulting on a group of properties instead of just one.
Sit down with a qualified accountant or loan professional. Bring all your tax forms, receipts, and any accounts you have. Have him go through your paperwork to crunch the numbers and give you a realistic portrait of your financial health.
Keep an eye out for common debt traps and wasted money (do you really need to spend $150 on cable plus $100 on 10 streaming services?).
If you’re not in the best position - don’t worry. You can work with companies to lower payments, consolidate debt, and resolve anything negatively impacting your finances.
Once you understand your financial situation, it’s time to look at the market.
Check Current Interest Rates
The housing market is complicated. Analysts fill the news with charts and graphs talking about so many different concepts. If you don’t understand it, it can all sound like a foreign language very fast.
What’s important to look at is the current mortgage interest rates.
Prime mortgage interest rates are set by the Federal Housing Finance Agency, although only the top-tier borrowers with six-digit incomes, perfect credit scores, and working with AAA-rated big banks ever get anything close to that. Most borrowers pay much more.
That’s the beauty of a blanket loan - by purchasing a group of properties at once, you’re getting bulk discounting. The lender decreases customer acquisition costs exponentially when you do this, and you reap the savings.
If the rates offered by blanket loan lenders seem low, it’s because of the same wholesale pricing that makes Costco worth shopping at. With that said, keep an eye out for deals that are impossibly low. It’s a red flag that you may be dealing with a scam.
Talk to Friends Who Have a Loan
With all the marketing and misinformation online, you may find it helpful to consult a friend. Consumer Reports finds friends are the most trusted sources of consumer information. Your friends aren’t usually trying to take your money, and they’ll give you an honest opinion of what their experience is like with a lender.
Interest rates are important, but it’s not the only consideration when choosing a lender. Making payments needs to be seamless, the contract needs to allow for changes in your life situation, and if you have questions, there needs to be someone knowledgeable to answer them.
Friends can give you pros and cons to make your online searches more relevant. Sometimes you don’t know what you don’t know. Don’t be afraid to ask before making a large investment. Otherwise, you may find yourself stuck in a bad situation with the wrong lender.
Once you have your ducks in a row, it’s time to start shopping for blanket loan lenders. We make our process simple. All you have to do is fill out an online form, and we’ll let you know exactly what you qualify for.