Understanding Real Estate Loans
Real estate loan is what a lot of people use to buy their home. Real
estate loans have been instrumental in bringing joy to people by
making that unaffordable house affordable. Some real estate
investors too make use of real estate loans for buying properties.
However, real estate loan is not free money and anyone who buys real
estate or plans to buy real estate using real estate loan must
understand the concept of real estate loan very clearly.
Real estate loan (also known as mortgage) is the money that you
borrow from someone (a financial institution i.e. a mortgage lender)
for the purpose of buying a property. The real estate loan generally
covers a part of your purchase price and the remaining portion has
to be paid by you upfront i.e. as down payment. The amount (i.e. the
percentage of total purchase price) that you have to pay as down
payment is conditional on a number of factors and you can generally
reduce it to even 5% by going for mortgage insurance. FHA and VA
loans (i.e. mortgage insurances through FHA and VA) reduce the down
payment requirement on real estate loan even further. Whatever you
borrow from the mortgage lender as real estate loan needs to be paid
back to the mortgage lender over a period of time (and, of course,
you will also need to pay appropriate interest on that real estate
loan). The tenure of your real estate loan and the prevailing market
rate will determine the amount of interest you pay for your real
estate loan. Generally, you are required to pay back the real estate
loan in the form of monthly installments which are composed of both
interest and principal portions of your real estate loan. Also,
there are various types of real estate loans e.g. fixed interest
rate loans and adjustable interest rate loans. So depending on what
type of real estate loan you have gone for, your monthly payments
might either remain constant (fixed rate) for the full tenure of the
loan or keep getting adjusted at regular intervals (adjustable
rate) on the basis of a financial index. Besides that, some other
costs are also associated with real estate loans e.g. there are
closing costs, inspection costs, attorney fee etc. Also, in case the
property needs some repairs, there will be costs associated with
that too. Again, there is stamp duty and other taxes that you need
to pay. So, really, you need to comprehend the concept of real
estate loans and the related costs clearly before you actually go
for the real estate loan. And understanding these concepts is really
not that tough.
ABOUT THE AUTHOR
Bob Schwartz, is a Certified Residential
Specialist, CA licensed real estate broker with
www.Brokerforyou.com. Bob
has over 27 years of residential real estate experience, authored a
number of published articles and served as an expert witness for
San Diego lawyers. You can contact
Bob via e-mail at bob@brokerforyou.com or visit his highly popular
San Diego real estate website at:
http://www.brokerforyou.com
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