Whether you’re purchasing your dream home or investing in a fix and flip property in New Jersey, you need some type of financing to help pay for your purchase (unless you have the cash). Since most people don’t have this kind of money, they apply for a real estate loan.
A real estate loan is a type of loan where a borrower enters into an agreement with a lender to receive cash upfront. They are required to pay back the loan in full by monthly payments. Real estate loans come in all types, including bridge loans, conventional mortgage loans, and hard money loans.
Because real estate loans are complex, it’s important to know what you are signing and your obligations to the lender. You’d hate to find yourself in hot water later on. Below are a few things to watch out for when taking out a NJ real estate loan.
How your credit report is being used
Mortgage lenders will go through your credit report with a fine-tooth comb. Don’t be the last to know about what’s on your report. Lenders base many things on your credit rating, such as whether they’re going to offer you a loan and at what rate. Obtain your free credit reports from each of the three bureaus. Always remember, if there are errors you should fix them.
Varying interest rates and loan terms
Start looking for NJ mortgage lenders early in the process so that you will be ready to act on your dream property. Starting early allows you to compare lenders and find the best rates. Even if interest rates and loan terms are similar across lenders, the final costs and fees may not be. Many lenders ask for thousands of dollars at closing.
Being approved for too much
When you set your sights on something you really want, it’s tempting to stretch your budget. But, there are additional expenses to consider than just your monthly payment. What type of work needs to be done on the home? What are the utilities expected to be? If you can’t afford the payments, the property will go into foreclosure.
Being asked to sign documents you don’t understand
People tend to not ask enough questions when signing an agreement, usually because they’re not sure what to ask! Know what type of loan you are getting, what the payments will be, how much interest you’re paying, and whether the interest is fixed or variable. Also ask about any fees that need to be paid upfront, as many lenders expect borrowers to come up with property taxes and insurance fees at closing.
If you are planning on purchasing a fixer upper as an investment, consider taking out a hard money loan. These privately backed loans are short term and secured by real estate. They are attractive for investors because they are fast and flexible compared to conventional loans. To see if you qualify, contact First Equity Funding today.