3 Things You Should Know About Real Estate Funding
When you are about to buy a house, whether to live in or as an investment, the fun part is locating the property and daydreaming about how to furnish it. Unfortunately, the more important part—securing funding—can be daunting and complex. There are three main things you need to know when it comes to financing your real estate ventures.
Different Types of Loans
First, find out what types of loans you qualify for, and know the differences between them. Look into FHA, VA and conventional options, which will entail different down payments and charge different interest rates. Acquire the shortest loan possible; you may suspect that a 15-year loan will result in payments twice that of a 30-year loan, but that is never the case. In most cases, spending just a few hundred a month more can cut your loan time in half and save tens of thousands over the life of the loan. If you are considering an investment property or vacation home remember that loans for primary residences differ from those for second homes, and those guidelines change constantly. Mortgage lending officers are highly educated, having been through an initial set of courses and undergoing continuous nevada mortgage renewal classes, so they know the latest regulations and recommendations.
Costs Beyond Purchase Price
Banks may be willing to loan you far more than you will be comfortable paying off. Do not take your pre-approval figure and blindly search for homes in that range. Scrutinize your budget, figure what you can spend per month and subtract 10% to give yourself some wiggle room. That will give you a target price range for your search and from there you can narrow down by size and age. You may not need all the space you think you do and costs rise by the square foot. Heating and cooling an older, bigger house is more costly than keeping a newer, smaller space comfortable. Landscaping, water and pest control costs rise on larger properties. Look at issues beyond size too—properties may be more expensive in certain neighborhoods due to more prestigious schools, but if you don’t have children it may not be worth it to you to pay that premium.
People used to think of real estate as a guaranteed investment, but that is not always the case. Before spending such a large sum of money, be sure you understand all facets of the deal. Large initial investment and long holding periods make real estate unsuitable for anyone trying to make money quickly. Property owners must also consider taxes, maintenance and neighborhood association fees when calculating whether real estate offers a satisfactory return on investment.