| Having an understanding of the different kinds of loans | | | | 3% to 5% residential balloons . This type of loan has to |
| is one very important decision when purchasing real | | | | be paid in full every 5 years or what ever the contract |
| estate. Knowing the simple truths can save you | | | | was for. When this happens you just have to go out |
| hundreds of dollars in the long run. People in general go | | | | and get another loan to pay for your existing loan or |
| and look at the interest rate and take the lowest kind | | | | just refinance with the same lender. The bad thing |
| the lenders offer. Without knowing the kind of loan | | | | about this loan is that you do not know how the |
| they are getting. | | | | interest rates are going to be when your loan expires. |
| Conventional loans are not insured by the government. | | | | The difference between a fix and adjustable |
| With this type of loan you will require a 5% to 20% | | | | mortgage. When purchasing the first property make |
| down payment and the interest rate will be a little | | | | sure that you have a fix mortgage. The way a fix |
| higher. The first real estate property you buy will be | | | | mortgage works is you are charged a fixed amount |
| with a small down payment the second will require | | | | on your principal for 30 years or what ever amount of |
| 20%. That's if you keep the first property. Having 2 or | | | | years you picked. If for any reason your payment is |
| more properties you are considered a real estate | | | | more it's because 1 of 3 things went up and that's |
| investor. If you become a real estate investor this will | | | | taxes, insurance, and PMI. The adjustable mortgage |
| be the main type of loan you will be using. | | | | starts out with a low interest rate but in 3 months or a |
| Adjustable loans are private loans not insured by the | | | | year your payment will go up. The time they decide to |
| government. This type of loan offers great rates but I | | | | increase the interest can be at any time it doesn't |
| don't recommend this to first time home buyers stay | | | | necessarily mean in 3 moths. They determine this |
| away from these loans. For real estate investors who | | | | based on how the market is doing and the interest |
| keep the property for 6 months to 2 years this loan is | | | | rates. It can go as high as 2 points per year. It does |
| a good tool. When banks/lenders offer this loan it | | | | cap , for this you will have to review your application to |
| starts out with a low interest rate but in a few months | | | | see how high it can go. Some times the rate will drop |
| you will notice that your payment jumped two hundred | | | | but it's not going to be that often or that low. |
| bucks. Then you are going to be wondering what | | | | About the private mortgage insurance. This insurance |
| happen, not knowing that you willingly agreed to this | | | | is required on all types of loans that are less than 20% |
| loan. No matter how I explain this to my clients they still | | | | down. Even when you use a conventional program |
| go out and refinance to an adjustable loan. | | | | that requires 5% down you still have a private |
| Balloon loans are used to finance commercial | | | | mortgage insurance. The PMI will be added to your |
| properties in most cases. There are lenders that have | | | | loan when buying with a minimum down payment. |