As the real estate market continues to grow rapidly and new technology gains ground, widely accepted beliefs that were true a few years ago may not be true today. Don’t jump into anything blindly or sign a real estate contract or home mortgage loan contract or any other type of contract without giving it some serious thought. Before you commit to a real estate purchase you’ll need to find a lender for the real estate financing of your potential home or investment property.
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Your income and your debts will typically play the biggest roles in determining what price range you should be looking at. Fifteen-year mortgages are an ideal option if you can handle the higher payments and if you’d like to have the loan paid off in a shorter period of time. Thirty-year fixed-rate mortgages offer consistent monthly payments for all of the 30 years that you have the mortgage. And if the market is good, you can benefit considerably from locking in a lower rate for the full term of the loan.
Most adjustable rate mortgage programs offer what is called “rate cap” protection, which limits the amount the rate can be increased each year and over the life of the loan and all adjustable rate mortgages are amortized over 30 years. Make sure to get an estimate of your real estate financing closing costs from the lender you’ve chosen. By law, the lender is required to give you a statement within three days of receiving your loan application. Any of the loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI).
A mortgage application can be resubmitted many times; it’s not uncommon for this to happen. Interest rates can go up if a picture is painted of a rosy economy and that it is flourishing, like more jobs being available. This can lead to inflation which will make the rates go up. Any money that you receive from a lending institution will show up on your credit report and the payments will factor into your debt-to-income ratio.
A reported FICO credit score is not a requirement for most conventional or government loans like FHA loans or VA loans. Potential borrowers can submit information about income, assets and equity to determine just how much a down payment should be. This is usually processed through an automated underwriting system. Twenty-year fixed-rate mortgages allow you to make a consistently higher monthly payment throughout all 20 years you have the mortgage. The shorter term means you pay off the loan off quicker and pay less interest and build equity faster than with a 30 year loan.
Check with you CPA, www.idahotaxprep.com, or other tax advisor for the most current tax information; your property taxes may be deductible. If you’re working with a home 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. If you’re hiring contractors, electricians, plumbers, and painters, you’ll probably need a construction loan, which provides funds to pay the subcontractors as the work goes along. If you plan to borrow money from other sources, some lenders may impose limits on how much of your down payment can come from other sources.
When financing real estate with a conventional loan 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. The FICO credit score is just one of many factors that are considered in loan or mortgage applications. Although the FICO score is taken into account there are no minimum scores required.
Ask other homeowners for advice about what real estate and mortgage pitfalls to look out for. Work with a reputable mortgage broker or lender to create a customized loan program with the best combination for you of rates, points, and closing costs to meet your needs. Before you finish with any real estate financing make sure you read every real estate contract and loan or home mortgage contract carefully before you sign on the dotted line. Each and every line is important – look for anything that’s vague or not clear and don’t be afraid to question what you don’t understand.