In order to buy an apartment, you will need a loan to finance your property like any other residential property. You have to run around various loan providers and financiers to get various documentations and completing the formalities. Rocco Basile who is expert in dealing with property buying and selling has provided few guidelines.
What is the type of your property?
Your property may be a condo, duplex or triplex and all properties are classified differently and the rules of loans vary according to the type of property that you choose to buy.
How to qualify for getting loan?
Any financier would like to check your income, credit score and the tax returns both personal and business for last two consecutive years. Important parameters that they check are as follows:
- Your annual income and expense details
- Your current debts
- Ratio between loan amount and the value of the property.
According to Rocco Basile, small banks are usually more flexible as compared to any large banks.
What are the terms of the loan?
Some people prefer short term loan that can be 5 or 7 or 10 years term while some prefer long term loan, which continues for 25 to 30 years. Interest rates can either be fixed or variable after a specific period of time. Interest rate also may vary for short or long-term loans.
How much loan can be obtained?
Normally any financier will expect that 25 to 30 per cent of the cost of property to be borne by the buyer while they will provide the balance amount. However, that must also be within certain maximum limit that varies from different financiers.
What is the fee?
There are various fees required like for example appraisal fee, closing cost fee, title and escrow cost fee, inspection fee, property insurance cost. If the property is located near flood zone then flood insurance will also be needed.
What is prepayment penalty?
In case, the borrower decides to pay off a large portion of loan much before the end of term then he needs to pay certain penalty for that. This penalty is calculated based on certain formula that also depends upon a number of factor. Some banks have a table created for this and based on that prepayment penalty is decided.
What is recourse and non-recourse loans?
If the loan given by the lender is full recourse then the lender can claim the asset of the borrower or guarantor in case the borrower fails to pay back the loan. In case, of non-recourse loan the lender will foreclose the loan and take the possession of the property.
What are the documentations needed?
Following documentations are needed –
- Photo of the property
- Full description about the property
- Total layout plans
- Details about nearby properties
- Various floor plans in detail
- Details about source of funds
- Closing price of the property
Name and addresses of seller, their attorneys and other professionals, who are involved in this deal.
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