Identifying Real Estate Funding

real estate funding

Funding your home is an important step in your real estate purchase. You will have to think about funding issues, the moment you decide to buy a home. Fortunately, there are numerous avenues available for funding your real estate purchase. Familiarization with some terms of real estate funding will help you evaluate your options. Some such terms are listed here,

Rate of Interest

Every Home Funding Institution will charge you interest on the amount it gives you as a loan. This interest is cost of loan that you will take. Ask all your lenders the rate of interest and then compare these rates. A difference of 1% point for a loan of USD 500,000 will save you USD 336 per month.

Taxes on Property

You will have to pay property tax on any new property, which you acquire. If you buy property closer to where you live now, you may save more then USD 100 per month. This extra money can be diverted to the payment of your mortgages.

Homeowners Insurance

This is the insurance money you need to pay to acquire the home. Check in advance what is the premium you will be required to pay every month and net cost of insurance. All of these are additional cost to the cost of your home. Now that you know what you will have to pay for that dream home, you can hunt for a funding source.

Sources of funding a real estate purchase include –

FHA Loans

Federal Housing Administration (FHA) has been providing funding assistance to home buyers since 1965. FHA does not give out loans perse, it is just an insurer of loans. A home loan insured by FHA means that lenders can close the loan without worrying about a default. Today, the FHA limit of the maximum mortgage that can be availed is USD 625,500. FHA loans are available to people who have lower FICO Scores, or people who have had bankruptcy declared. Even if a person has faced foreclosure, but maintained a good credit history thereafter; he/she can avail of home loans from FHA.

Veterans Administration Home Loans

People who have served in US Armed Forces may avail of home loans from private mortgage lenders etc. Veterans Administration ensures a part of this loan. The guaranteed amount for such a loan is called Entitlement. Maximum entitlement for a loan of USD 144,000 is USD 36,000. One can get full funding for a VA Loan without any down payment. For loans backed by VA, no Private Mortgage Lending Insurance is required. You can get extremely competitive interest rates also.

Private Mortgage Lenders

You can get all the funding from private lenders as well. There are numerous lenders who will evaluate the credit history and provide you with a free quote of their charges as well. These lenders will offer you a loan based on their evaluation of your credit history, cost of your home etc. There are numerous lenders who compete in this category and you can find many on the Internet also. You will be provided with online quotes as well.

Funding your real estate property will be easy if you have a good credit history. In case you have had a bad history, your choice of funding institutions is limited, but not eliminated altogether.

Real Estate – Shared Equity

shared equity

Shared equity is an innovative form of joint mortgage/joint ownership the government promotes to help the ones who are first-time property buyers. It includes many features that are attractive to a buyer so that he can materialize his dream of owning a new house.

Shared Equity Scheme

The shared equity scheme is launched because of the struggles of the first time buyers become a major political issue in the recent past and it is estimated that the scheme will create an extra 100,000 homeowners in the UK alone by 2010. The major attraction of the scheme is that the buyers could take a 75% mortgage and the remaining part of it will be covered by an equity loan from the government and the lender. This way the buyer gets to save a significant sum on his investment. People will find it quite easy and convenient so that he does not have to go for other alternatives that may be tricky and confusing.

The Chief Features

The shared equity envisages that the first time buyer of the property does not own it in conjunction with any other party as against in the case of shared ownership. At the same time, the scheme takes out more than one loan for the property – an equity loan and a mortgage. There is not going to be any co-owner of the property and you are the sole person on the deeds; however, if the property is to be sold, then the property buyer has to repay all the loans and he has to pay a proportion of the increase in the equity of the property (if there is any) to the party who is making the equity loan. One of the major features of the shared equity scheme is that there is much flexibility and ease to implement it so that the person who is going to buy will be quite relieved at the prospect of a great help from the part of the government.

In certain countries, one of the initiatives was termed as the Open Market Home Buy Scheme and it allows the prospective buyer to choose any property from the open market that comes within their range. The scheme is available to all the key public sector workers, the ones who are on a council waiting list, social tenants and other priority first time buyers that include the ones with a household income of 65,000 pounds or less. There are similar projects in the United States as well and the aim of the project is to revitalize the housing sector by making real estate investments affordable.

Conclusion

The shared equity scheme is quite different from the mortgage loans and the processes and procedures involved in it help the buyer in general and the materialization of the wishes of the buyer, especially the first time buyer, come true. It is a great option for anyone looking to own a real estate property at an affordable rate.

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