Having your finances in order prior to making an offer on an investment property does two primary things for you. The first is expediting your closing as your mortgage arrangements have essentially been pre-ordered and the second is spending arranging financing for investment propertyless time documenting your loan file with the assurances of an approved loan.

You can arrange for private financing or obtain a loan from a bank but you won’t both sources of funding from the same entity. Unless of course you obtain the services of a mortgage broker.

The two primary sources of financing come directly from the mortgage lender or arranged through a third party; a mortgage broker. National, regional and local lenders can employ the services of a mortgage broker to help bring their mortgage offerings to the general public.  A mortgage broker solicits mortgage referrals from professional service firms such as accountants and attorneys as well as market directly to real estate agents in the area.

A mortgage broker has several marketing agreements with certain lenders who in exchange for providing slightly lower rates, wholesale rates get the benefit of the overhead and marketing costs associated with originating a home loan.

The broker can represent national lenders who offer traditional loans such as those underwritten to Fannie and Freddie guidelines as well as send loans to private lenders who specialize in private, or “hard” money mortgages. And while conventional lenders all may approve loans using predetermined lending criteria, banks may also impose additional loan requirements called “overlays” that other banks do not impose. For example, one bank may require a 660 credit score for an investment property loan while another only asks the credit score be no lower than 620.

And if a conventional loan can’t be approved either due to the borrower or the subject property, the broker has the option of sending the loan to a private lender for consideration. Mortgage brokers don’t make the lending decision themselves, and sometimes that can be a drawback, but their access to multiple lenders can provide investors with more options.