Don’t jump into anything blindly or sign any real estate contract or home mortgage loan contract or any type of contract without giving it serious thought. This year alone, Americans are expected to borrow $1.33 trillion in acquiring 7.4 million houses, condominiums and co-ops. If you have monthly obligations like car payments, credit card payments, personal loan payments, student loan payments, etc., be sure to take these into account when you’re determining your bottom-line affordability figure.
Be careful when working on your real estate financing; if you make too many loan inquiries, with applications, it may look like you’re shopping for credit; this can be a glaring red flag for many lenders. If you’re working with a local builder within a sub-division or housing development and just making carpeting, lighting and appliance selections for a brand new home, you’ll probably be able to get a standard mortgage loan; but if you’re hiring contractors, electricians, plumbers, and painters, you will probably need a construction loan, which provides funds to pay the subcontractors as the work progresses. Get an estimate of your real estate financing closing costs from the lender you’ve chosen; by law, the lender is required to provide his statement to you within three days of receiving your loan application.
When financing real estate it’s important to know that a low FICO credit score does not mean you won’t qualify for a home loan or home mortgage. Some lenders may impose limits on how much of your down payment can come from borrowing from other sources. 15-year fixed-rate mortgages mean consistent monthly payments for all 15 years that you have the mortgage; you build equity even more quickly than with a 30-year or 20-year loan, and paying less in interest, you save money in the long run.
Keep in mind that adjustable rate mortgages are best for homeowners who aren’t planning on staying with a property for a long period of time. If you’re buying a second home or second property, you’ll need to identify the sources for your down payment, since you will not be selling your current house and using the proceeds, and you’ll need to expect a larger monthly payments for housing or other expenses too. If you have a less-than-perfect or a ‘bad credit’ credit report it may not be a problem.
With adjustable rate mortgages the initial interest rate is usually lower than with a fixed-rate mortgage and the monthly payment would also be lower. There are plenty of options that are ideal for those who have a few bad credit marks on their credit report. The real estate financing situation for each buyer is unique.
Disadvantages of an adjustable rate mortgage include the possibility of increasing monthly payments if interest rates go up. People usually are not aware that they may be able to customize their loans; just ask the mortgage broker or lender; although lenders advertise 15-year loans and 30-year fixed rate mortgages, applicants can ask for 20 years, 25 years or any other number of years; this may allow borrowers to build up equity faster but keep monthly payments affordable. If you’re having a problem getting a home mortgage and the seller still owes money on the home you can check with your lender and see if you can get a wraparound mortgage; although not legal in all states, it will allow you to pay the monthly payment on the existing mortgage and an additional payment to pay the difference; make sure that a wraparound mortgage will not trigger a due-on-sale clause.
If you’ve applied to other lenders, when you finally do select a good lender you may have to explain why there are other inquiries from lending institutions on your credit report. If you do borrow money for a down payment it must be disclosed to the lender or if any of your money for your down payment was a gift, provide proof for it.
Take your time, study all the resources available online and offline and get lots of advice from several mortgage and real estate brokers and professionals before you do any real estate financing or investing. You have to be careful not to assume that you can cut back on your expenses and stretch yourself into a house payment; you don’t want to be cutting into healthy eating habits by eating fast food or junk food for a house that you may not be well enough to live in for a long time – consider this when you first start out searching for the best real estate financing. Remember that buying a home may be the single biggest investment you’ll ever make; invest carefully.