Real Estate Financing – Creative Financing Tips

This year, Americans are expected to borrow $1.33 trillion in acquiring 7.4 million houses, condominiums and co-ops. Before you do any real estate financing, if you have bad credit because of consumer debt like credit cards or personal loans, you’ll want to try to eliminate or reduce this debt since it will affect your ability to qualify for a commercial or home mortgage and make the estimated monthly payment. 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 are determining your bottom-line affordability figure.

If rates in the current market are high, you’ll probably get a better price with an adjustable-rate loan. A fixed-rate mortgage means that the interest rate and principal payments remain the same for the life of the loan but the taxes may change. Loan programs for down payments of 20% or less require that you purchase Private Mortgage Insurance (PMI).

Interest rates may go up if a rosy picture is painted that the economy is flourishing – like more jobs being available; this can lead to inflation which will send the rates up. You’ll also need to consider closing costs and the escrow account for your taxes and insurance. Also keep in mind when you’re financing or refinancing that most people move or refinance within seven years.

Most of all you’ll need to decide what you can afford to buy. And if a loan application isn’t approved for the first time, it can always be resubmitted after modifying it, for example, like raising the amount of the down payment. If you’re a first-time home-buyer it is possible that you may qualify for a lower down payment or lower interest rate; check with mortgage brokers, online mortgage companies, your county housing department or your employer to see if they know of any programs like this available.

Revealing a FICO credit score is not a requirement for most conventional or government loans like FHA loans or VA loans. Thirty-year fixed-rate mortgages offer consistent monthly payments for all of the 30 years you have the mortgage; if the market is good, you can benefit from locking in a lower rate for the full term of the loan. 15-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, for example, if you plan to retire.

A 20-year fixed rate mortgage term will mean higher payments, when compared to the 30-year fixed-rate mortgage. 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. Check with your CPA or accounting professional; you may be able to deduct the interest you pay on the mortgage loan and some of the financing costs of the home, like points, on your income tax return.

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 red flag for many lenders. Keep in mind that adjustable rate mortgages are best for homeowners who aren’t planning on staying with a property for a very long period of time.

Collect a few of the local home guides you see stacked up at the local grocery stores or supermarkets and look at a few of the ads in the real estate section of your Sunday newspaper for houses you might consider buying. Get lots of advice about real estate financing, mortgages, interest rates, mortgage rates, mortgage refinance, bad credit mortgages, etc., from many different sources, don’t rely on one source, and think about what makes sense to you. And thinking positive about real estate financing is important but so is being realistic.