Real Estate Financing Options

When you’re putting an offer on a piece of real estate, you want to already have your financing decisions made. There are several main types of financing available. You should do your research for your specific financial situation before you put an offer on a piece of property, so you can make sure you’re getting the best possible loan for your particular needs and financial background.

FHA or VA loans

FHA or VA loans are loans that are backed by the FHA or VA. These are loans that can be offered to first-time homebuyers and veterans with low or zero down payments. FHA and VA loans are insured for the lenders. When you apply for an FHA or VA loan, you’ll go to a traditional lender like a bank or mortgage broker and will get the loan through that organization.

If you meet certain requirements by the FHA or VA, you can get these loans that are insured by these organizations to protect the lenders from potential foreclosure. These insurance policies allow the lenders to give you an incredibly low interest rate and a minimal down payment with minimal closing costs. The goal for these programs is to put people in homes that they otherwise perhaps would not be purchasing.

Traditional Loans

Traditional loans through banks, credit unions, or mortgage brokers aren’t insured like the FHA or VA loans, so you’ll likely be paying a larger down payment (about 15 percent) and have a slightly higher interest rate. These loans are for those who want to make a sizable down payment on their homes in order to have smaller monthly payments and to have some instant collateral in their homes. If you’re seeking a traditional mortgage, shop around to find the best deal for you.

Talk with different lenders about how much of a down payment you want to make and how much of a loan you’re looking for. Shop not only for the best interest rate and monthly payment, but also look at closing costs and other fees that the lenders would be offering you. Take the time to apply for several different traditional loan situations so you can find the best deal for you.

Rent-to-Own

Owner-finance situations are also a popular way to have financing for your home. If you don’t believe you would qualify for an FHA or a VA loan and you don’t have the cash for a down payment for a traditional loan, you may want to find home owners who might be up for financing the property themselves. Owner-finance situations are gaining in popularity, as more people are investing in real estate rental property and want long-term people in their properties. In an owner-finance real estate situation, you live in the home while the owner continues to own the property. You sign an agreement with the owner that you agree to pay a monthly rental fee for a set particular number of months, after which time the property then either becomes yours or you will make a large balloon payment or obtain a loan to acquire the property at a set cost. In many owner-finance situations the person buying the home typically will pay a higher interest rate and higher monthly payments in order to one day become the owner of the property.

So you see there are some options for financing when purchasing a home and you need to do your research to determine which is the best fit for you and your financial situation.