It is very tricky to secure real estate financing from a lending institution, and current recession has further aggravated the situation.
It becomes specifically difficult for first time borrower as the lender will be very reluctant to give you a loan unless he is content about your credibility.
To make the job of securing loan from a loaning institute a little easy, here are some important steps that you should take prior to applying for a financing.
The most significant thing is that you must keep this in mind that the lender is seeking for a prospective borrower.
Therefore, your credit ranking plays the most significant role here.
Moreover, the lender calculates your net income and your debt burden from which he concludes whether it will be workable for you to service the debt smoothly.
Also, the local laws of the area are also considered.
The concept of credit rating is very easy - the higher your credit rating, the more chances you enjoy of receiving a financing from potential lenders.
A high rating is crucial as it reflects your potential to service the debt as well as your overall reliability.
If you need financing for commercial property, you should try to persuade the lenders that your business will be successful.
Your financier would like to know that your business will generate sufficient funds to cover the monthly installments.
Thus, include all your expenses before calculating the estimated profit.
Lender lends money on one condition that he has minimum chances of borrower's going default.
Because this way he will lose his money just as well.
And to reduce this risk, he will look into view the current market trends.
This way, if he sees that your business might not thrive in the market, you won't get the loan.
Investing in a good location is very important as it will make all the difference i.
e.
the actual position of the property is a settling element which decides whether your loan faces approval or rejection.
For example, you would have negligible chances of getting your loan approved for an isolated piece of real estate.
Last of all, it is crucial to bear in mind that your loan result can vary from officer to officer.
Therefore, select your loan officer meticulously as a good officer would let your application process go smoothly and a difficult officer can cause you a real pain.
A good idea is to see if any friend or an acquaintance knows one and has worked with a loan officer previously, and ask him for an introduction.
It is very normal that the loan officer would ask you some strange questions that might seem outright irrelevant to real estate financing application, but stay calm as he is doing it to be satisfied about every possible aspect of your financial standing prior to approving your financing facility.
You should be clearly aware that the lender is looking at every possible situation that can lead to your default in the future.
You should carefully plan for the real estate investing project prior to knocking the door of a potential lender to finance.