Nearly everyone dreams of being a homeowner someday. Others may want to build income through investment properties. However, in reality, obtaining real estate isn’t all that simple because in real life, even the least expensive homes cost quite a bit of money. Folks are then left asking themselves why they ever thought purchasing real estate was possible in the first place. Yet, with a little dedication and preparation, it is actually very possible for most people with steady incomes to find their own little piece of the pie.
Here are four ways to make getting a real estate loan just a little bit easier:
Accrue a Larger Down Payment
One of the reasons that getting a real estate loan can be difficult, especially after recovering from a recession, is that lenders are looking for people who are very serious about paying off that loan. One way to help prove that you are a responsible borrower is to save a substantial down payment. Twenty percent of the purchasing price is ideal.
Monitor Your Credit Rating Early
Another way to demonstrate your responsibility as a borrower is to establish a good credit history early on in your financial portfolio. This is simply done by paying debts in a timely manner and keeping debt to income ratios down. An idea credit score is around the 740 mark.
Deal with a Small Bank
What if a loan seeker is struggling with a sizable down payment, high credit score, or both? A good strategy is to go to a local, smaller bank for funds. Large banks have stringent guidelines that they must follow. While smaller banks also have guidelines, sometimes they are a little more forgiving. Another great option is the local credit union.
Consider Owner Financing
If all else fails, think about approaching a seller with an owner financing proposition. At one time, this was a less-than-ideal situation for both parties involved. However, whenever real estate loans are difficult to come by, this can be a much more relevant option for people who need to sell property, as well as people who want to purchase it. The key to making this kind of arrangement work is to have very clear guidelines and expectations for both parties involved.
Even so, if a person is looking to buy their own home or become involved in investment properties, there are ways to improve their chances of getting the money they need to make it happen.
Before you get any type of installment loan understand all the fees and how interest rates are figured out. Saving a down payment and working for a high credit rating are two of the best ways to achieve this goal — but thinking about working with smaller banks and exploring owner financing are reasonable alternatives too.
Photo Credit: James Thompson
For investment properties,local banks are the way to go.
I’ve been landlording for the last 25 years and all of my mortgages were with one local bank that had about 8 branches. They held their own paper rather than selling. No fanniemae guidelines as to how many mortgages I could have. Today they are all paid off.
Now as I’m getting older,more tired and having hip problems I’m selling properties to other landlords in blocks of 4 to 6 houses at a time and carrying the paper. I have the contracts drawn up by the president of the same bank as he is an lawyer as well. The contracts stipulate that my buyers make payments directly to the bank. They handle all the bookwork for me,add late charges should there be any and the money goes directly to my account.For this terrific service they charge a whopping $5.00 per month ( that I can write off) which as far as I’m concerned is free.
The great thing about dealing with a local is that you get one on one service. If I found a steal,I call the loan officer at 10:am. At 10:05 I’m approved, sometimes with nothing down. I’m on a first name basis with every employee there. Even been to a couple Xmas parties over the years.