Unless you’re independently wealthy, when you purchase real estate you’ll need a real estate loan to close the deal. Such loans, usually called a mortgage, is the fiscal vehicle by which property buyers finance their acquisitions. While a mortgage is very usually a large sum of money, and the real estate is often the most expensive thing most of us will ever buy, for real estate investors it will soon become a regular occurrence in their normal business dealings. But regardless, you shouldn’t let fear or confusion keep you from the mortgage process, or the land you want to secure for yourself.

Application for a loan requires: time, paperwork and patience.

Check Your Credit Score

  •                 Bad Credit = 300-600 FICO score
  •                 Poor Credit = 600-649
  •                 Fair Credit = 650–699
  •                 Good Credit = 700-749
  •                 Excellent Credit = 750-850

Pull Your Credit Report and Check for Inaccuracies – You may need to do some work here.  There can be loans that are paid off that have not dropped off of your report.  You will need to get on the phone and clear up any inaccuracies.  This can take time (months) so plan early in your home buying process.

Know your Debt-To-Income Ratio – You are aiming for debt less than 36% of your income.  So pay off any loans or debt you can to be viewed favorably in the home loan process.

Before shopping for the home you want – determine what you can afford.  You want to be able to comfortably make your payments so stick within your means.

Necessary Paperwork – Home Loan Companies are going to want to see your work history and income information.

Down Payment – Many lenders require 20% of the home value for a down payment.  Start saving early!

Compare Lenders – Not all banks and mortgage lenders have the same deal.  Pay attention to your loan percentage rate, down payment required and closing cost percentages when comparing lenders.

Even looking for a mortgage can be complicated, and the mortgages themselves are often full of details and paperwork that apply to the process, but it is possible to navigate through and emerge on the other side with a mortgage that’s steadily paying off your brand new piece of real estate. Most people will go through a traditional mortgage loan, one extended by a standard financial provider such as a bank. But some mortgages are offered by private sources. Some can be obtained by using existing property you own to secure the loan. And there are even certain kinds of investment loans that you may qualify for, and can use to make your purchase.

Key Points:

  • 1-Traditional Loans – Mortgages by banks or financial institutions
  • 2-Private Money – Investors lending capital.
  • 3-Home Equity Loans – Using existing real estate equity to purchase additional property.
  • 4-Qualifying Loans – Loans for specific groups of people such as a VA loan for veterans.
  • 5-Hard Money Loans – These loans are secured by collateral (current assets).
  • 6-Crowdfunding – Small contributions from many individuals.

Even when seeking real estate investment loans, it’s crucial to understand the importance of preparation.