Preparing to Buy Real Estate Investments
Real estate investing has long been a way to turn profits, and if you have an interest to buy real estate investment, plenty of opportunities are out there. However, if you are like most investors and plan to rely on mortgage financing to execute your purchase, then it is important to prepare yourself adequately for the parts of the process that take place between pre-approval and final approval of your loan.
How To Buy Real Estate For Investment
1. Stay abreast of mortgage program changes.
As lenders try to walk the fine line between maintaining enough regulations to manage risk while offering enough flexibility to bring in enough mortgage revenue, programs go through changes quite frequently. This means that a pre-approval letter from three or six months ago may not reflect the current situation with your lender. Make sure that you have your T1 General forms ready, because some lenders are starting to ask for those in addition to the Notice of Assessments so that they have access to all of your income information.
2. Make sure that your tax affairs are in order.
If you have any late filings with income tax, make sure that you catch up on those. A broker might secure you pre-approval on the basis of a letter proving employment, but the documents you must go through at closing have fairly stringent rules about such matters as bank statements, tax bills and proof that you have satisfied old debts.
3. Line up a solid income history.
Mortgage lenders are particularly interested in your income history, as that serves as documentation that you will be able to stay current with your payments. If you have been in the same position or with the same company for several years, that should satisfy the bank, as long as your debt to income ratio falls within lending guidelines. If you are self-employed, though, things can be a little more complicated. Many self-employed people make more than enough money to fund the mortgage they want, but they do not receive the same amount from one month or quarter to the next, and there are verification issues as well for those who want to establish that they actually make what they say they do. This is not insurmountable, but showing a track record of assets is important.
4. Keep looking for the latest information about mortgage information programs.
Buying Real Estate Good Investment
As an investor, you do not have access to the premium rates that are available to people who are buying their principal residence. However, the Canadian government has a vested interest in encouraging investment activity within the real estate sector in order to bring that part of the economy back to life. The CMHC website (http://www.cmhc-schl.gc.ca) regularly updates information about new and existing programs designed to help encourage investment. Based on your current situation, one of these programs might enable you to buy that “flip” property you have your eyes on.
The real estate market represents a strong opportunity for investors. With interest rates at historically low levels, and with prices just starting to perk up, there is no time like the present for entering the market.