Lending Matters

Real Estate is one of the few investments that whether you are buying your eighth property to add to your portfolio, or your first, it is still one of the largest (or the largest) purchases you’ll make in your lifetime. Real Estate isn’t getting cheaper, in fact, property values are at an all-time high with no indication of dropping any time soon. So, how do you fund this purchase??

The majority of buyers know little to nothing about the lending process. Their knowledge consists of the conventional, 30 year, fixed-rate loan that almost all traditional homebuyers utilize. Being uneducated and uninformed in lending products can be costly. Remember, knowledge is power! When it comes to lending, the more you know, the more you can?save.?

Let’s dive into this - conventional loans typically require a 20% down payment to avoid paying private mortgage insurance (PMI). The average single-family home in Colorado Springs is over $470,000. A 20% down payment for a $470,000 home is $94,000. Wow! That’s nearly $100,000 – that’s more than some households make in 2 years. So, what other options are out there?

First you need to understand the different types of mortgages. There's the most common fixed-rate (typical options are 30-year, 20-year, and 15-year) mortgages. Fixed-rate mortgages are the most popular because a set interest rate means a predictable monthly payment. Then, there's the adjustable rate (ARM) mortgage. ARMs are less popular for the same reason that fixed-rate mortgages are - your rate changes. Other types include the balloon or interest-only mortgages (interest only payments until the end of the term when the full balance is due), and a reverse mortgage (gives homeowners access to their home's equity in a loan).

Most homebuyers will fall pursue a fixed-rate mortgage. From there, there are countless programs for various populations. For example: first-time home buyers, veterans and active duty service members, medical personnel, investors, and new construction. Check out a few options for primary residences:

-???????VA Loan: 0% down (Military personnel and Veterans)

-???????FHA Loan: as low as 3.5% down (Popular with first-time home buyers)

-???????USDA Loan: 0% down (Eligible in certain rural areas)

-???????Physician’s Loan: 0-10% down (Doctor’s and certain medical personnel)

-???????New Construction and Renovation Loans: programs and products differ based on your lender

At the Lana Rodriguez Group, we always say that cash is king and knowledge is power! The more capital, the more leverage and buying power you have. The more you know, the more money you can potentially save (or make!). If you can utilize a loan product that allows you to keep your cash on hand, you are that much closer to buying your next investment property. And for those who have no interest in owning more than one property, keep your cash to invest elsewhere or add value to your home!

If you have any lending or homebuying questions, contact our team of agents and preferred lenders today!