Are you dreaming about buying a new home or taking the leap toward house flipping?
Real estate loans make it possible to own a second house, invest in a vacation home, grow your rental income, and finance more properties as you flip homes.
Let’s look at the benefits and processes behind real estate funding.
1. Different Types of Real Estate Loans
The most recognizable real estate loans are mortgages. Homebuyers can choose from fixed-rate mortgages or adjustable-rate loans, also known as ARMs. However, you’ll likely pay higher interest rates on fixed-rate loans than ARM mortgages.
ARM real estate loan rates respond to current market rates; thus, interest rates fluctuate. You could also opt for a hybrid mortgage which only has fixed rates for a limited time.
Conventional loans are popular with homebuyers who have excellent credit and cash on hand. These loans also have fixed rates and a maximum of $700,000 or less. Loans over the max are considered jumbo real estate loans.
2. Government Real Estate Financing
Your next option is government-insured loans. The federal housing association backs these loans; thus, they’re popularly known as FHA loans.
FHA loans have low-interest rates, but credit is still a significant determiner. Applicants with good credit can pay as low as 3.5% interest rates. Applicants with lower credit scores can still apply for FHA loans, paying up to 10% interest rates for lower FICO scores.
Another type of government-backed real estate funding is VA loans. These loans are for military service members only. Both veterans and active military members can apply for VA financing.
The U.S. Department of Agriculture backs USDA real estate loans. Mortgage insurance may be required, adding to your monthly fee.
Are you planning on generating income from your properties?
Look into rental loans to buy that ideal home or duplex to grow your income.
For example, you could try an owner-occupied loan, ideal for duplexes. You’ll need to provide rental lease contracts first to be approved. You can also get rental loans backed by the VA or FHA.
3. Tips for Getting Approved for Real Estate Funding
Interest rates are one of the biggest challenges of real estate loans. Of course, the lower the interest rates, the better, but how do you get such low rates.
Your first step is to improve your credit. Draft a debt payment plan to clear your debts. You’ll notice a nice boost in your score.
Another problem is not having enough credit; believe it or not, this also lowers your credit score. An easy way to establish credit and grow your score is to open a simple credit line and make total monthly payments. You could also finance a large purchase like a refrigerator or a car.
Find the Ideal Real Estate Loan
Are you ready to take the leap from renter to homebuyer?
Finance your dream home with one of the above real estate loans. Start improving your credit to be eligible for low-interest rates sooner than later.
Don’t forget to visit the blog to discover more information!