6 Facts to Understand About How Residential Real Estate Loans Work
April 27, 2017
Are you thinking about getting a home loan so that you can finally purchase the house that you have always wanted? If so, you might be wondering just how residential real estate loans work. These are some of the main facts that you’ll probably want to know when taking out one of these loans.
1. The Bank Cares About the Collateral
First of all, you should know that the bank does care about the collateral. In this case, the collateral is the house. You might be required by the lender to do various things to ensure that the home is worth what it is being sold for, such as having a home appraisal and home inspection done. Some lenders might require additional steps, such as having a termite inspection or presenting documentation about whether or not the home is in a flood zone.
2. Your Credit Score Does Matter
Even though there are some programs out there that can help you get approved for a home loan with bad credit, you should know that your credit score does matter when buying a home. If at all possible, you may want to take steps to improve your credit score before going out and applying for a mortgage loan.
3. Saving Up a Down Payment is Ideal
It is sometimes possible to get a home loan without a down payment or with a low down payment. However, this is generally only an option with certain programs or for people with really good credit. If you are concerned about getting approved for a mortgage loan, you should consider saving up as much of a down payment as you can. Not only can this help you get approved for your loan, but it can also help you lower your payments as well.
4. There are Programs That Can Help
There are government programs out there that can help, such as those that are designed for people who are looking to buy property in rural areas or those who have served in the military. You may want to inquire about these options before getting a loan to see what is available for you.
5. It Can Be a Long Process
Don’t assume that you will be able to buy the home of your dreams right away. The loan approval process can be a long one, so be prepared to wait.
6. Different Lenders Have Different Requirements
Different lenders do have different requirements, and some are stricter than others. If you can’t get approved with the first lender that you work with, you may want to consider broadening your options. You might find that there is another lender out there that will approve you.
Buying a home for the first time and getting a home loan can be a more challenging process than many people think. However, as long as you know what to expect, you can help ensure that things go as smoothly as possible. These are some of the main facts that you’ll want to understand when going in to take out a residential real estate loan.