Financing Real Estate

terry_mccrawMoney to buy Real Estate is available at low interest rates for long terms, to those with a high credit score and the ability to repay. This could be the best time in the last 40 years to buy Real Estate.

Real Estate Inventory is high. Many owners are motivated to sell. Prices are down. Financing is available. What more could any buyer ask?

Conventional Loans, FHA Loans, VA Loans, and many other types of Financing are readily available to qualified buyers.

Recession hasn’t slowed down the lending institutions. Many lenders are anxious to make good loans on Real Estate. They simply don’t want to make bad loans.

Normally, loans that are 80% or below of the appraised value have the best terms. Payments are lower because Private Mortgage Insurance, ( PMI ) with costly premiums added to payment, is not required.

80/10/10 loans are loans in which PMI is not required because the first loan is 80% and 10% is financed on a second loan which could be an equity loan or an equity line. Down Payment on a 80/10/10 is 10%.

Generally FHA loan down payments are in the neighborhood of 3% of the sale price. Most VA loans do not require any down payment. VA loans are made to Veterans. Conventional Loans are usually salable loans and account for a large percentage of Real Estate Loans. In-Bank Loans are sometimes available and do not normally have the strict requirements of other type loans.

Closing Costs at settlement usually run from 3% to 5% of the loan amount.

Most lending Institutions offer fast pre-qualification or preapproval of a loan, and issue letters to that effect. This is helpful when making an offer on a property, subject to financing. It shows a seller that there will most likely not be a problem with the buyer obtaining financing.

Generally, to be pre-qualified for a loan, one must submit to a lending institution funds to pay for a credit check, a list of existing debts and income figures, and evidence to show gainful employment. Pre-qualification or Preapproval from a lending institution will always be subject to the property appraising high enough to secure the loan applied for and also dependent on the information furnished from the person seeking a loan is accurate. Many Lenders have the ability to issue pre-qualification  or preapproval letters within  24 hours.

One thing is for sure. Interest rates will not remain low. They will rise when the economy improves and when inflation is under control. Better to finance now at a lower interest rate than later at a higher interest rate.

Locked in interest rates are available. Most lending institutions will lock in an interest rate for a short period of time, (30 to 45 days) but will not lock in a rate for an indefinite period of time due to interest rates constantly fluctuating. Locked in interest rates for a long term loan will assure a buyer that the payment will not be going up. Payments can go up minimally if the taxes and insurance on a property goes up, to adjust the escrow account.

Variable interest rates can help a buyer get a lower payment at the beginning of the loan. Variable interest rate loans are especially good for folks who have jobs that will pay higher  salaries or wages later on. This type of loan allows a buyer to get a higher priced home than they could obtain using another type of loan at a higher fixed rate. Later, when income levels increase, buyers can afford a higher payment which may result from an interest rate hike.

Refinance can be advantageous to buyers with high interest rate loans. Generally speaking, if a person can save 1.5 to 2% on an interest rate, it is considered worthwhile to refinance. Refinancing is costly due to closing costs, but may be worth it if it affords enough savings over the term.

Lenders who have experienced loan officers with good reputations are to be sought out by buyers. They can make a person’s dreams come true by providing a way for them to buy the property of their choosing.

Unless a person can afford to pay cash for Real Estate, financing is necessary. Interest on Home loans is tax deductible. Loans that do not have early payoff penalties and that include the right of anticipation of principle without penalty are to be sought after since one never knows the future and may wish to sell the property and/or pay off the loan early.

Real Estate Financing is a big business for lenders and the largest investment most people are apt to make. Professional help should be obtained to learn all about Real Estate Financing before a person commits to nearly a lifelong commitment. Professional Realtors have some knowledge about Real Estate Financing but usually rely on Lenders to advise buyers of their best options.