Residential real estate a place where people reside may be a single family or multi family housing set up. A residential real estate may have commercial space for business, some such areas may even exclude the use of such commercial set ups.
To purchase such residential real estate, a huge amount of money is required. Money can be borrowed from banks/ financial institutions or brokers in the form of residential real estate loan.
Like any other loan, a residential real estate loan involves the borrowers and the lender. The lender initially pays a sum to the borrower which is paid back in installments. These installments may be regular or otherwise. With the home loan market booming with several loan products, it is easy to shop around for a loan product that suits our need and budget.
Another type of loan which is very similar to residential real estate loan is “reverse” mortgage. A reverse mortgage is generally available to elderly who have very little money for their needs but enough equity in their homes. It helps such retired people to get a steady cash flow from their homes without having to sell it.
Now that we have understood the means of a residential real estate loan we should also know the various disadvantages that such loans have. One such hiccup is a default in repayment. In case the borrower is unable to repay the loan installments for 30 days then the borrower would make a phone call to make their monthly payment. After a period of 60 days the lender sends a reminder letter along with a phone call to make the payment. After a period of 90 days the lender sends a “pre foreclose” letter explaining the terms of the mortgage agreement due to default. Here a lender can ask for repayment of the installment due plus interest along with any later fees applicable. In even of non-payment of all these dues the lender can file a law suit to repossess the house.
Residential Real estate loans are primarily used to improve, buy or to refinance a property which is of residential use. These loans are of help to people with poor or bad credit scores but with a lot of money on their hand. Such people can opt for this type of loan as the bankers will only look at its money making capacity rather than the credit history of the borrower. Residential Real estate loans are considered as commercial loans as the borrower can make money out of the property by renting it out.
Another important criteria in these loans is the ratio of cash reserves and loan to value.
For a residential loan, a buyer’s credit history, the ratio of loan-to-value and cash reserves is major criteria.
There are many advantages of residential real estate loans. It is a long term investment plan which is more viable than commercial loans which require a huge down payment and unpredictable rates. Residential real estate loans are easier to get as the it is easy to product proof of profitability.
Residential real estate loans are for those who want to get the best loans with low interest rates and even earn money from the investment.