For most of us, it is necessary to secure a mortgage loan when trying to buy Real estate. Here are some basics that you should have under your belt, so you can make the smartest decision when deciding which loan is the right one for you. You also should be able to answer a few questions so you can find a loan that best fits your personal situation.
Preparing to Buy Your Real Estate Investment
In order to find out which loan is the best for your situation when purchasing real estate, you need to know about your personal finances. You should be aware of what your credit score is, how much you can afford for a down payment and how long you plan on residing in the residence that you are buying. This will better allow you to move forward with the bank and get pre-approval.
Loan Choices to Finance Your Real Estate
When considering mortgage loans to purchase your Philadelphia real estate, for example, the first thing you need to consider is the interest rate. There are two basic options here: a fixed-rate mortgage or an adjustable-rate mortgage.
- With a fixed-rate mortgage, the interest rate remains the same for the entire life of the loan. This means that you will be paying the same amount monthly for the span of the loan.
- Investment real estate adjustable-rate mortgages work differently. Here, the interest rate will change over time, as will your monthly payments. They can either increase or decrease depending on certain variables, but usually your monthly payments end up being greater than your initial payments were. This may allow for you to pay less at first in the hopes that you will be able to pay more later.
When securing your real estate investment mortgage loan, you are also going to have to choose between conventional or government loans. With a conventional loan, the government has not insured the loan in any way; conversely, a government loan is insured by some sort of federal agency. Here is a list of some government loans:
- An FHA loan is insured through the Federal Housing Administration.
- A VA loan is insured and managed by the Department of Veteran Affairs.
- A USDA loan is managed by the United States Department of Agriculture.
Final Steps in Securing Your Mortgage Loan
Once you have a better understanding of your personal financial situation, you can go to a mortgage broker or bank and begin the process to become pre-approved. Becoming pre-approved is almost always necessary when making an offer to the owner of a house; it gives the owner proof that you have the money to purchase a piece of investment real estate property. If you have any questions or concerns, your bank/broker can always do their best to assist you.