Seeking ways to finance a real estate purchase can be an overwhelming task. Many options are available based on your needs, such as government-insured home loans and traditional mortgages with fixed or variable rates. An experienced professional, such as your lawyer, lender or accountant, can help look at valuable features to determine which works best considering your circumstances.
Before finalizing your decision, it is best to review specific terms a lender might require for your loan, including the following:
- Prepayment penalty fees
- Restrictions on your right to sell the property without the lender’s authorization
- Insurance coverage and its maintenance
- Escrow payments for insurance and taxes
- Property use limitations
- Occupancy requirements
- The lender’s right to adjust interest rates during the loan’s term, and if there is an existing mortgage for you to assume
Examining these details could help gauge your obligations as a borrower when you receive funding and long after closing the purchase. This information can also help you compare between loan types and choose an option that lets you accommodate other financial responsibilities.
What other financing terms should you check?
Some terms could be applicable based on timing, such as a financing contingency. It could help secure your deposit if you cannot get the loan by the indicated closing date. Timing is crucial in real estate transactions, so this option could be helpful, depending on the circumstances.
Financing for residential properties must also comply with specific disclosure rules and other policies, making documentation and timeline requirements crucial. Because of these complexities, buying property could be challenging. The process could require intricate planning and preparation to move the process forward and resolve any issues.