When buying a home, getting a home loan is the most important step in the process. You’ll need to know the basics to get your real estate financing in place.
Real estate financing list and checklist for getting a home loan
First of all you’ll need to find a lender for your real estate financing and potential residential or home investment. You can do this by asking friends, family, co-workers, real estate agents, real estate brokers, real estate professionals and search the Internet for local lenders. Look in your neighborhood. Try to find a well-established institution. Be careful about working with mortgage brokers– they broker loans and work with several institutions. Some are not reliable and many go out of business when the market dwindles, although your underlying loans should be okay if it is with a reputable institution. Mortgage brokers may come in handy if you need to do some creative or difficult financing or shop for the best interest rate, etc.
Call several of the local lenders and try to get an idea of the interest rate they are offering right now– TODAY. This can change by tomorrow however.
Fill out a loan application.
Get an estimate of closing costs from the lender you’ve chosen. By law, the lender is required to provide his statement to you within three days of receiving your loan application. Make sure you know what type of loan program your lender has chosen for you. Get the rates, terms and any special information such as prepayment penalties, etc.
If you’re working with more than one lender compare the costs.
You can negotiate fees. Oftentimes you can negotiate the amount of the fees or loan points the lender charges you. (A point is one percent of the loan amount. Two points is two percent of the loan amount and so on.)
You can consider lowering your interest rate by paying more points. The more points you pay the lower the interest rate will be. Think this over carefully before you do this however. Get advice -it’s not the usual way to go.
Provide all the documentation that is required for the loan application as quickly as possible.
Pay any upfront fees required. For example, sometimes the lender will require the appraisal, credit report or processing fee be paid upfront – before the loan is processed.
Review any loan papers. About one week before closing on your property the loan papers will be ready for you to review. Make sure that the loan figures match the original quote you were given.
Have someone you know who is a real estate professional, real estate agent, real estate broker, real estate attorney or any other related real estate expert AND your CPA, go over the papers with you. Also it’s good to know what tax benefits you will have and what taxes you’ll have to pay at closing and going forward.
Sign your loan papers and deposit your down payment into your account about three or four days before closing on the property.
You’ll need to get a cashiers check for the down payment to the title company, escrow company or real estate attorney who is handling the closing on the property. Make sure to do this on a weekday when banks are open. You don’t want to lose it so try to time it so you can get the check and take it to the title company but make sure you have allowed enough time for the money to be in your account– transfers from other accounts can take 24 hours or more. Think ahead. The lending institution will send a check to the title company for the amount of the loan.
Now just sign off on all the contingencies – these are called ‘subject to’s’ – and wait for the transaction to close. Then receive a deed and the keys to the property. You are now done. Congratulations! Good work! Real estate financing is easy when you know how to do it! You now are an investor with a great residential investment.