Invest in Real Estate by Knowing Your Borrowing Power

Invest in Real Estate by Knowing Your Borrowing Power

Knowing your borrowing power can help you invest in real estate because it will show you the amount you’re allowed to borrow with the bank. The bank figures out what you can afford per month and then calculates the amount of a mortgage based on that monthly amount.

If you use a mortgage calculator to figure out a monthly payment that you can afford then it’s one step closer to buying a second home. Makes sure you put in the current interest rate because it will make a big difference in your monthly mortgage payment.

So add up all your bills and weight them against your income to see how much you can borrow. Make sure you do the loan term over 30 years because it will be the lowest monthly payment. You wont be able to immediately use the rent as income because the bank needs to see the steady stream of income before they start weighing it against your debt.

Put a small down payment down and buy the second home. Then after you rent it out you can start looking for another home. After about 6 months you can use the rent as income with the bank on your next home. Any interest calculator will help you realize how much you can afford each month and help you figure out your borrowing power.

I recommend getting a fixed interest rate instead of an ARM rate because in this economy interest rates can only go up. You don’t want to get stuck in an adjustable rate because it will keep going up over the next few years, just like real estate will.

Plug in a few different interest rates into a mortgage calculator to see the difference in the monthly payment. You’ll be surprised how much the rate will effect your mortgage. The higher your monthly payment is the less you can borrow so you want to make sure you get the lowest rate to keep your borrowing power up.

By Nathan Dean

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