Three Key Words in Real Estate: Research, Research, Research!

The old saying was that, when it came to real estate, the three key words are “location, location, location.” We respectfully disagree. In today’s economy, the three words you need to remember are: “research, research, research.” We’ve all heard about the astronomical rate of foreclosure. While it is a difficult time for many Americans, it is also a time of great opportunity for others. Home prices and interest rates have dropped. But how do you know that you’re getting the best mortgage? It can be overwhelming, IF you don’t do your homework. Here are the steps involved in proper research.

The first and most important step is to get a copy of your credit report. A credit report is basically your financial history. It is attached to your social security number and can give lenders an idea of your credit worthiness. Your credit score helps lenders determine if they will give you a loan and/or what interest rate you will have. The scores range from 350 (very poor) to 850 (excellent). You must find out where your score falls in the range. This will give you an idea of where you stand and what you can expect.

Consider more than one source of financing. When people wanted a mortgage loan a few decades ago, they simply went to their bank. Today there are many more options for the future homeowner. Mortgage brokers, lending associates, and real estate agents are just a few of the options available to you. Even FHA loans are making a comeback, as the guidelines are more lax than before. Owner financed homes are also becoming popular. You must heavily research all the different possibilities to decide on the one that’s right for you. Take at least two weeks to think over your options before coming to a decision.

Now start your research in earnest. There is some mortgage lingo you should understand before you start talking to lenders. I’ve already mentioned interest rates. Rates are the percentage you pay the lender for the loan. For example, if I lend you $10 at a 5% interest rate the total amount you will owe me will be $10.50. The interest rate is largely determined by your credit score and the term of your loan. Term refers to the length of the loan, typically 15 or 30 years.

Always keep closing costs in mind. These generally include appraisals, legal fees, registry fees, and more. There are loans that offer “no closing costs.” This is usually because enough commission is made to cover these costs for you. Be careful with this and be certain it isn’t more advisable to just pay the closing costs. You must also be watchful of frivolous or unnecessary fees.

Don’t overlook the downpayment. Most standard loans require a 20% of the home price up front. Take a look at your finances and calculate how much you can afford. This will help dictate what price range you should be looking in. Some lenders offer loans with no down payment. However, great care should be used when evaluating this possibility. Loans with no down payments generally have higher rates.

Remember that are several different types of mortgages available. These include: fixed-rate mortgage, adjustable rate mortgage (ARM), interest only mortgages, and even reverse mortgages. Each of these has their own positive and negative aspects. You must do your research and choose what option best suits your needs in the long term.

Once you have the research done, you’re halfway through the difficult process of getting that new home.