You will not get the best home loans by being passive. Even though today you have access to information that only real estate insiders had in previous generations, it will not help you if you do not know where to find it. Here are some research tips on how to find the best home loans.
Have I Determined What I Want First?
The amount of information online about real estate is overwhelming even to professional, full time real estate agents. Even people who do this full time tend to specialize, and you should specialize as well. The secret to researching real estate is understanding that you do not have to know everything: You only need to be an expert in what will actually affect you. Limit yourself by your needs, your budget, and other factors.
Why Should I Research My Own Finances First?
Your finances will determine the outcome of your forays into real estate. Researching your own finances to find out how much house you can afford and what lenders will do business with you is a great second step. You should also delve deeply into your credit so that you can improve your finances. Having a great credit score, a good debt to income ratio, and two lines of credit open with no balance are great ways to improve your chances at a home loan. However, you may have mistakes on your credit that are not even your fault if you do not conduct this research well beforehand.
If you are a first time home buyer or simply feeling inexperienced, going through the prequalification process is a good move. Prequalification will prepare you for preapproval. Because your preapproval loan amount sets your hard limits, you want it to be as high as possible even if you do not use the total amount.
Limit your research into properties by your finances. Once you have determined how much house you can buy, you can find more information on the market at that level. You will see what houses within that range are selling for, and you will be able to get into the heads of sellers at that level. All of these measures will help you to get a better home loan when you finally walk into a lender’s office.
What Should I Research About the Properties That I Like to Get a Good Home Loan?Â
The location of the property that you want may have a difference in the home loan that you get. For instance, the United States Department of Agriculture (USDA) Rural Housing Program offers highly advantageous loan programs for people who buy housing in eligible areas. No, those areas are actually not all rural: The USDA will actually subsidize loans that are in big cities as well.
Aside from the location of the property, you should also research the type of property. Certain government subsidies will only work for properties that fit a certain structure. For instance, in order to qualify for a Federal Housing Administration (FHA) 203k loan, your condominium structure may not have any more than four units.
If you are looking for a non-conventional loan, you would also do well to research the property type. Many lenders have more experience with a certain type of property, and they consider those properties less of a risk than others. However, you will never know this unless you are able to drill down into the banking records for certain types of properties for a local area. Again, limitation and drilling down is the key to good research, not necessarily general expansion for no good reason.
What Research Should I Do on Lenders?
Since you will be applying to more than one loan during this process, flying in the face of the statistics that shows 75 percent of people only apply for one loan, research on many lenders is essential. Programs from the federal government are not the only line to subsidies for your home. Many local credit unions maintain programs for this purpose as well.
Doing your research on lenders and playing their offers against each other will help you as well. The more that you make bankers compete for your business, the better that your loan package will become. Home loans are among the most profitable kinds of loans that a bank can take on, and you are the one in control until you sign on the dotted line. Get the information about the credit unions that are offering subsidies to make everyone offer them to you.
What About Researching the Seller?
You may find a seller who is willing to give you a seller financed loan, allowing you to completely skip over the rigors of a bank. However, you will likely never find these people unless you drill down into your market by location and budget.
The amount of research that you should do throughout the home loan process is substantial, but when you consider the amount of money and time that you are investing into the property, the research seems small in comparison. You will definitely get paid back in cost savings and quality of life if you get a great home loan and a great home, so take on the challenge now in order to get a huge reward later.
2 Point Highlight
The secret to researching real estate is understanding that you do not have to know everything: You only need to be an expert in what will actually affect you.
Since you will be applying to more than one loan during this process, flying in the face of the statistics that shows 75 percent of people only apply for one loan, research on many lenders is essential.
