If you are planning to invest in real estate, whether it be to rent, flip, or otherwise, you might need the assistance of a mortgage loan. The real estate bank loan process can be complicated at times, but it does not have to be incredibly difficult. Here is what you need to know about the real estate bank loan process and how you can prepare.
The first step in securing a loan for your real estate purchase is to get pre-approved. This will give you an idea of what lenders are willing to loan for and can help you make important decisions about your purchase. Pre-approval is especially important in a seller’s market, so you have a fighting chance in bidding wars. In this step, lenders will pull your credit and assess your debt.
Your lender will need to have a complete understanding of your financial situation. They will consider your debts and assets, credit history, and income. To prevent any delays in the real estate bank loan process, get your docs prepared ahead of time. You can expect to provide the following documents to your lender:
- 2 years of tax returns
- Bank account statements
- Investment portfolio statements
- W2s or profit and loss statements
- Finalize loan
After your offer has been accepted, you are ready to apply for the mortgage and finalize the terms. This will involve making decisions on the final rate, down payment, and length of the loan. If you followed the previous step and prepared your documentation, you will be ready to pass it along to your lender. Once your application is complete, you will receive a loan estimate with preliminary figures.
Underwriting is the lender’s process of reviewing your financial standing and reliability as a borrower. During this process, it is imperative not to make any big financial moves. This means no big purchases and no moving money around or closing/opening accounts. The typical time frame for this process is approximately 30 days but could fluctuate depending on the lender and the circumstances.
A home appraisal is part of the lender’s underwriting process. It will help determine the home’s value and whether this is on par with what you’ve agreed upon with the seller. The property appraiser will evaluate the home against similar properties in the area to determine this. If the appraised price comes in higher or lower than the sales price, you might need to renegotiate the terms of your contract and/or the terms of your loan.
Intro to Real Estate
If you are interested in investing in real estate but don’t know where to start, we get it. That’s why we have created real estate education courses for those looking to leave their 9-5 job in pursuit of something greater. With these courses, you will learn about the real estate bank loan process and all of the other fundamental elements of investing. These courses are designed for levels and learning styles and use real-life investing scenarios to most effectively prepare our students. We are passionate about equipping people with the knowledge and tools they need to pursue financial freedom for themselves because we have experienced this firsthand. If you are ready to start investing in your future, contact us today.