Probably the biggest difference between a real estate investor and a homeowner is how they approach financing a property purchase. Investors look for creative financing solutions that meet their investing needs. A homeowner\u2019s purchase is just as much of an investment and these people should take a few pages from the investor\u2019s strategy book. Not all of these strategies (such as money partners or cross collateralization) are applicable to the average homebuyer but many will work. Homebuyers just need to be a little more aggressive and spend some time learning about options.<\/p>\n
Begin by thinking rather than doing.<\/strong> You\u2019re going to need professional help whether this is your first home purchase or your fifth. Getting started, the two most important professionals to engage are a real estate broker and a mortgage broker. There are two important considerations when engaging both. First, don\u2019t allow the conversation to be a one-way interview qualifying you as a client. As part of your thinking process, develop a list of questions you want them to answer. If you\u2019re unsure what questions to ask, seek out a friend or relative that has recently purchased a home to ask what frustrated them or where they felt questions\/information where important or lacking. Also ask the professionals for a few references of people you can talk to about their experience. Also as part of your thinking go beyond interview type questions. Develop a list of steps in the process you need more or current information about. For instance, if the last time you purchased a home the old HUD-1 form was used at closing, you want to become familiar with the current Closing Disclosure form. Also, there are a lot of fees and costs involved with a home purchase. Whether the buyer or the seller traditionally pays specific fees varies by location but most are negotiable. Be sure you know what is traditional and what can be negotiated. If you have trouble thinking of questions and information you need answers to, ask the first few professionals you talk with for a checklist to get you started.<\/p>\n Learn about mortgage options.<\/strong> How much do you know about paying points down? Is this better for your circumstances than making a larger down payment? Have you considered a 20 or 15-year mortgage rather than the traditional 30-year mortgage? You might be surprised to learn how little your monthly payment goes up when you pay your mortgage off in half the time. You can learn about this from an online calculator or by talking to a mortgage broker. Don\u2019t hesitate to ask about other mortgage products that are available. The industry has changed tremendously over the past 20 years.<\/p>\n Entire books are written on the many types of home loans available. You need to at least know how the most common ones differ to determine which is best for you. A few of the common ones include: Conventional Mortgage, FHA Mortgage, VA Loan, USDA Rural Housing Loan, Adjustable Rate Mortgage (ARM), and 203k Rehab Loan.<\/p>\n Know the difference between pre-qualified and pre-approved.<\/strong> These are two separate steps in the mortgage process. Being prequalified doesn\u2019t guarantee you\u2019ll be approved for a mortgage. A pre-qualification is typically free and based on financial information you provide to the lender. Pre-qualification can done online or with a telephone call. The lender pre-qualifies you based on the information you provide without documentation and without verification. Once you are pre-qualified is a good time to ask more detailed questions about what type of mortgage you are being qualified for and what else is available. If you don\u2019t qualify for a mortgage or not one high enough for your desired purchase price, it\u2019s a good time to discuss with lenders what you might change about your finances to improve your chances of success.<\/p>\n Pre-approval comes with a limited loan guarantee.<\/strong> You\u2019ll have to complete a mortgage application and usually pay a fee. You\u2019ll also have to provide official documentation that you probably don\u2019t have at your fingertips. With pre-approval, you receive a conditional commitment in writing for an exact loan amount. This allows you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller, as he or she will know you\u2019re one step closer to obtaining an actual mortgage. Although the lender verifies your financials at this point, these will be verified again shortly before closing. Final approval is based on there being no significant negative changes in your finances (a good reason not to go out and charge a house full of new appliances before closing). The final approval is called a \u201cloan commitment,\u201d which is only issued by the lender when it has approved you and the specific house being purchased (after the appraisal).<\/p>\n There\u2019s more to a mortgage than being pre-approved.<\/strong> There are many things you want to know about the mortgage you are taking out. You want to know how the monthly mortgage payment fits into your monthly budget and where you might have to cut back spending (if at all). You also want to know what your monthly mortgage payment will include such as escrow accounts for taxes, homeowners insurance, PMI, and HOA fees.<\/p>\n Everyone\u2019s life and financial situations are different. Mortgages are not one size fits all. Not only do you want to end up with a home you\u2019ll love for years, you want a mortgage that you\u2019ll be comfortable with for all of those years. A few things to you want a full understanding of are: This article raises more questions than it answers. The purpose is to get you thinking about what is probably the biggest investment you\u2019ll make so that you structure a deal best meeting your needs and situation.<\/p>\n
\n\u25fe Amount borrowed
\n\u25fe Loan Term (years)
\n\u25fe Interest Rate
\n\u25fe Down Payment
\n\u25fe Loan Program<\/p>\n