Real Estate is a necessary part of our daily lives. We all need somewhere to live. In this day and age, with so many people relying less on professional help to start their search and more on the internet, it is important to know what lies ahead. Being informed helps provide buyers with the best potential to buy a property which suits their needs. First, buyers should know that, generally speaking, using a licensed Broker/Realtor comes at NO COST to them. Real Estate Professionals are paid out of the proceeds of the sale of the property. That means the amount you pay for the home is already inclusive of the Realtor fee(s). Many people do not realize such and avoid quality advice as a result.
Below are a few key definitions most relevant to buyers in the purchase of a property.
TYPES OF HOME LOANS
The first step in searching for a home is to be prequalified for a mortgage. Buyers should meet with their lender prior to looking at properties to know what they're able to afford, as well as what type of loan they're looking to pursue. Rates vary from lender to lender, and also from person to person depending on numerous factors including credit rating. A typical fixed rate 30 year mortgage interest rate in February 2017 is approximately. 4.16% according to Freddie Mac. Another important piece of information to know before meeting with a lender is the amount you are prepared to have as a down payment. If you have less than 20% of the purchase price to put down, you will need to have PMI, or private mortgage insurance. Your lender will be able to explain that to you. The following are common types of mortgages that you can consider when preparing for a real estate purchase.
Conventional Mortgages are the most commonly used loans. These loans are NOT backed by the government. Conventional mortgages can vary in their lengths as well.
FHA mortgages are backed by the Federal Housing Administration. These loans are commonly used among those with little to no funds for down payments. FHA loans are subject to more stringent guidelines in terms of property condition than conventional loans.
VA Loans are backed by the Department of Veterans affairs and only available to veterans or their current spouses.
203K Rehab Loans are most commonly used on distressed properties. These loans budget for the borrower to complete extensive repairs on the property that will, upon completion, become their primary residence.
There are other types of loans but these are the most commonly used today.
TYPES OF HOME SALES
There are three major classifications when it comes to the type of sale of a particular property. Those are Traditional, Short Sale, and Foreclosure/REO/Bank Owned.
A Traditional sale is an owner to owner transaction. The current owner of the home is selling the property and have listed it for an amount they feel comfortable with. In traditional sales, buyers typically have the most leeway to negotiate not only the price, but other relevant terms of the sale.
A Short Sale is the sale of a home by an owner in conjunction with the company holding their mortgage to a new owner for a price lower than what is currently owed on the property. The term short refers to the amount of proceeds received by the existing lender. Buyers can receive a great deal on a property in these sales, but need to be patient as the process of purchasing the property in question takes longer than other types of sales. Short sales typically take a minimum of 90 days, or 3 months, to close.
A Foreclosure/REO(Real Estate Owned)/Bank Owned sale is one where the buyer deals directly with a bank or lending company that has legal possession of the property. The purchase of a property owned by a bank or lending company can be substantially lower than other types of properties, however the room for negotiation on home conditions is typically much lower than with a traditional sale. A lot of these properties are sold AS IS, meaning the bank or lending company will not make any repairs to the property requested by a buyer.
If you're prepared to start looking into purchasing a home, we are happy to help. Our team of expert Realtors are waiting for your call and happy to help put your family into a property suited for YOUR particular needs. Call our office for any and all questions you may have today at 815-477-3000! We can also refer you to a number of lender options if you're unsure where to start.