Different Loan Types Explained

Purchasing your first home can be difficult to navigate, especially if you are new to the real estate world. All of the brand new lingo getting thrown at you can be super overwhelming, so if you’re feeling confused, you’re not alone! However, the good news is that even though this process may seem complicated, it’s truly very simple! Unfortunately, if you don’t have cash outright to buy an entire house (most people don’t, especially for their first one), you have to borrow the funds from a bank with interest. Your real estate agent may recommend a lender, or you can pick your own if you like to do your own research. Either way, you should expect the same process.

What To Expect When Talking to a Loan Officer

The first question your personal or suggested loan officer may ask: “What type of loan do you want?”

Your real estate agent, loan officer, or lender may suggest one that they recommend. Or, they may ask more questions about your situation to determine the right choice. They might throw out words like conventional, 10-31 Exchange, investment, FHA, fixed rate, adjustable rate, and more. If you’re feeling confused, let’s help break it down to terms that actually make sense.

Types Of Loans

  • Conventional: This popular type of home loan isn’t insured or guaranteed by any government entity. This separates it from the following types of loans.
  • FHA: The Federal Housing Administration (FHA) mortgage insurance program is managed by the Department of Housing and Urban Development (HUD), a federal government entity. Fortunately, these loans are available to all types of borrowers, contrary to popular belief. Check out our guide on FHA loans for more details on this type of loan.
  • VA: The U.S. Department of Veterans Affairs (VA) offers a loan program to military service members and their families. Similar to the FHA program, these types of mortgages are guaranteed by the federal government. This means the VA will reimburse the lender for any losses that may result from borrower default. The primary advantage of this program (and it’s a big one) is that borrowers can receive 100% financing for the purchase of a home. That means no down payment whatsoever. Thank you for your service!
  • USDA: The United States Department of Agriculture (USDA) offers a loan program for rural borrowers who meet certain income requirements. The program is managed by the Rural Housing Service (RHS), which is part of the Department of Agriculture. This type of mortgage loan is offered to “rural residents who have a steady, low or modest income, and yet are unable to obtain adequate housing through conventional financing.” However, the requirements vary by county. We recommend meeting with your local lender for more information on a USDA Loan.

Sub Types

  • Fixed-rate: Fixed-Rate loans have the same interest rate for the entire repayment term. This means you can expect your mortgage rate to stay the same forever. Well, at least until your home is paid off completely. It’ll never change, making budgeting easier. Simple!
  • Adjustable-rate: These types of loans will adjust every once in a while, usually every year after an initial fixed time period. This is also known as a hybrid loan, since there is a fixed rate before switching to an adjustable rate. For example, a 5/1 ARM loan has a fixed rate for the first five years. After this, it will adjust every one year, or annually.

Conclusion

A great real estate agent and loan officer will make the process of buying a house simple. They can explain the different types of loans and help you find the right one for you. However, our experts here at CDA Real Estate Investment recommend researching loan types on your own as well. This helps guarantee that you choose the perfect loan type for you.

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More Tips for Real Estate Investing

Real estate investing could be complicated for a lot of people, but it does not have to be like that at all. If you are a seasoned investor or someone new to the market, there is something for everyone in the following article. Continue to read and learn how you can invest in real estate successfully. After reading, check out some of our other real estate investment tips!

Punctuality is Everything: Always be on time when you set up a meeting with a potential client. This will indicate that you mean business and will show no disrespect to your potential customer. Coming to a meeting late shows that you are unorganized and do not care about your customers, which will cause you to lose them.

Find Your Niche: Be sure to stay in a comfortable niche. If you really focus on a specific segment it’s much easier to be successful with investing. Whether you are flipping houses, working with starters or dealing with properties with low down payments, stick to what you know for success.

Think Long Term: Keep two things in mind. First, do not pay too much for the ground. Do not pay too much for the business itself. Objectively assess the land value and the anticipated profits from the business that will be conducted upon it. It is important that both of these numbers provide a good deal for you.

Stay Connected: You can join real estate groups online, and you can also follow blogs from prominent investors in the market. By doing this, you will learn important things to help you with your strategy. You might even have the opportunity to talk with someone on a personal basis.

Do Your Research: Pick properties that you’re confident will raise in value. Properties near businesses or waterfronts are likely to increase in value. Consider the long-term costs and think about the possibilities.

Network: Find a contractor to work with that you can get along with. There’s no reason to get someone to help you with fixing up the real estate you invest in if you don’t like how they operate. You can save yourself a lot of frustration if you just find someone that you know will work well with you.

Prep Work: Always remember that you should call all utility and cable companies to mark their lines that lay underground before you begin any landscaping or digging on the property. It may well be illegal for you to dig, and it can be harmful to the property also.

People make money investing in real estate, but they lose lots of money, too. Now that you’ve read this, you should boost your chances of success. Do not have fear when you are going into a deal. Share this advice with others to help them benefit from it, too.

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This Tuesday is Independence Day! Fireworks Yay!

It must be July, here comes Independence Day!  Makes you think of burgers and hot dogs on the grill, soda and iced tea, fireworks, Summer!  Yay!

Here are a few facts we think you might not know about how fireworks got to symbolize the Fourth of July in America.

John Adams, the father of fireworks on the 4th?

That’s right!  John Adams, second president of the United States!  Adams wrote a letter to his wife, Abagail on July 3.    He said, “I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival…  It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bells, bonfires and illuminations from one end of this continent to the other, from this time forward forever more.”

But did you know that he thought the country was celebrating the wrong date?  Well, he did!   The continental congress approved a motion for the colonies to separate from England on July 2.  In Adams’s mind, that was the original Independence Day.  But, not until July 4 did delegates from the thirteen colonies vote to adopt the Declaration of Independence.

But what about the fireworks?

“One of the most elaborate celebrations in 1777 and the first organized celebration of its kind occurred in Philadelphia. This event had all of the elements of typical future celebrations–the discharge of cannon, one round for each state in the union, the ringing of bells, a dinner, the use of music, the drinking of toasts (it would subsequently be traditional to have one toast for each state in the union), “loud huzzas,” a parade, fireworks, and the use of the nation’s colors, in this case the dressing up of “armed ships and gallies” in the harbor.” Virginia Gazette.

America has been celebrating July 4 as our Independence Day since 1777, so go out and celebrate!

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Can I buy in a seller’s market?

What is a seller’s market, anyway?  A seller’s market means that the real estate market favors the home seller, not the home buyer.  If you have been waiting to sell your home, wait no longer.  Now is the time.  But, if you have been waiting to buy a home,the process may be a bit tricky.  Do not despair!  We can help!  Here are a few tips to help you buy your new home!

One, be ready to buy!

Make sure that you have your financial information ready and complete.  You will need to know how much you can spend.  In addition, how much you can borrow, and how much money you need to put down on a house.  Talk to your lender and have this information ready to give to your licensed real estate agent.  He or she will then be able to direct you to homes that you can afford.  Also, they will find you homes that fit your wish list.

Two, be prepared for a fight!

Since there aren’t enough homes to supply all of the potential buyers, you need to be ready to fend off all comers!  Once you find a home that you would like to offer on, you and your realtor need to agree on an offer.  When there are lots of buyers, your offer will need to be strong.  Remember, you aren’t the only one who wants this home, and if your offer is too low, it will be overlooked.  That means that you will have priced yourself out of a home that otherwise might have been just the one for you.  You want your offer to command the seller’s attention and not offend him or her.

Three, be ready to move!

If you follow our tips and shop for your new home only after you have prepared your financial information, hired a real estate person, looked at and chosen a home, and made a good strong offer, start packing your bags!

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This Sunday June 18th is Father’s Day!

This Sunday, June 18th is Father’s Day.  With good luck, the weather will be just right for a nice backyard barbecue or some time on the lake or maybe a round of golf with Dad.  These we are all familiar with.  However, in other places they have very different traditions for Father’s Day.  Let’s see what other people do for Dear Old Dad on his special day!

When did we start celebrating Father’s Day, anyway?

Opinions vary on this, but either in 1908 or 1910.  According to some, the practice began in 1908 in a coal mining town in West Virginia.  The day was set aside to remember 362 men who died in a mine disaster the previous December.  This was a one-time event.

According to others,  a Spokane Washington woman, Sonora Smart Dodd heard a very moving  sermon on Mother’s Day. That lead her to propose a special day to celebrate fathers.   There are also scholars who believe that the tradition may have started as early as 4000 years ago in Babylon.  A young boy inscribed a clay tablet with wishes to his father of good luck and long life.

Whichever origin appeals to you, Father’s Day became an official American holiday in 1972.

When in June do other countries celebrate?

Other countries celebrate Father’s Day on different dates. In Italy, Spain and Portugal, June 19th is always Father’s Day.  June 19 is St. Joseph’s Day, a catholic holiday.  St. Joseph, the father of Jesus Christ is the patron saint of the dying as well as of the universal church, according to catholic.org.

Then there is Russia, where, on February 23, they celebrate men in general.  The day is called Defender of the Fatherland Day.  The day is for honoring soldiers.   The women give their men gifts, whether or not the men are dads.  Nice work if you can get it.

Our conclusion, our Dads deserve a special day, so go out and enjoy your Dad!

 

 

 

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