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3 ways to fund your first real estate investment

On Behalf of | Jul 10, 2020 | Real Estate

Getting into real estate investing can be rewarding for the person involved. But real estate investing takes money. With that said, here are three ways individuals in North Dakota can fund their first real estate investment.

Conventional loans are the most common type of mortgage loans and is a great option for first-time real estate investors. Investors provide a down payment and the lender provides the rest of the money in exchange for a lien on the property.

With a conventional loan, investors may be able to put as little as 5% down. However, be prepared to put around $20 so the loan is not subject to private mortgage insurance. One thing to consider is that conventional loans are not the best option if investors plan to flip the property. This is because these loans are underwritten for a term of 15, 20, or 30 years.

FHA stands for Federal Housing Authority and is a government-sponsored loan that encourages people to purchase a home by only requiring a 3.5% down payment. This can be a great option for first-time real estate investors who don’t have a lot of cash flow. Not forgetting to mention, since the FHA takes some of the risk of the loan, it’s easier for prospective borrowers to qualify.

Hard money is another potential option for first-time real estate investors needing additional cash flow for their first investment. With hard money, a lender will use the property to secure the loan.

Hard money loans are short-term and is often used to help investors fix up a home to flip it. Using hard money could be great for investors because it will typically cover up to 70-80% of the property’s purchase price. For individuals preparing for their first real estate investment, it’s a good idea to have a real estate attorney to make the process easier. A real estate attorney can draft and review contracts, review loan agreements, and review titles to ensure investors have a successful transaction each and every time.

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