Types of Real Estate Loans

Obtaining a real estate loan can be easy with a little understanding on your part. You should evaluate the different programs with the assistance of a professional. Some things you need to consider are:
How long you plan to keep the loan?
Cash available to the borrower at closing.
Points and fees.
Current income versus future income.
Fixed rate loans versus variable rate loans.
Loans with negative amortization (bad).
Sub-prime loans.

Real Estate Agents

Length of Loan. How long you plan to keep the loan. Why get a thirty year fixed rate mortgage if you only plan to keep the home or the loan for three years? An example of the is a service member that is three years from retiring who is planning to retire in Florida and is stationed in the northwest. In this case, they may want to consider an adjustable loan. On the other hand, if you plan to keep the house for a longer time, you may want to look at fixed loans.

Get pre qualified. Save time and make your self a competitive in the real sate by being pre qualified for you new home. It is a simple process and gives you more buying power and lets you know in advance how much you can afford. It will also help you narrow your selection of homes and saves you time. This is extremely useful.

Loan Points and Closing Costs. Understand the relationship between rates and points which affect the cost of your loan at closing and the interest rate on your loan. When you are charged a points, this is considered to be prepaid interest which is tax deductible. Every point charged on a loan is equivalent to one percent of the loan. On a two hundred fifty thousand dollar real estate loan ($250,000), one point is twenty-five hundred dollars ($2,500). This results in higher closing costs, adds up quickly and it takes longer to recover the prepaid interest. If you only going to be in the loan a short period of time, you might consider a higher interest rate. It will save you in the long run. On the other hand, if this is the last real estate loan you will ever have, getting the lowest interest rate is probably going to be better for you. Decide on the type of loan you want. Examples include no cost no points, no cost and points, or pay costs and pay points.

Here are some general guidelines for a loan:

Loan in Yrs Recommended Real Estate Loan
1 - 3 3/1 ARM, 1 year ARM
3 - 5 5/1 ARM
5 - 7 7/1 ARM
7 - 10 10/1 ARM, 30 Year Fixed, 15 Year Fixed
10 plus 30 Year Fixed or 15 Year Fixed