How to Get a Loan to Buy Property

Your reasons for wanting to understand how to get a loan to buy property could be anything from ultimately wanting to build a house to eventually opening a business on the property you purchase. Some people have a desire to own property just because it can be a good investment. Regardless of your reasons for purchasing property, there are a few things you should do before you get out and start looking for the perfect property to buy.

Know Your Credit Score

Your credit score is going to be the deciding factor regarding whether or not a lender will actually give you a property loan. If you attempt getting a loan with bad credit, you will have a hard time. With good credit, which is typically considered anything around 700 and above, you’ll find a lot more lenders who are willing to work with you. A score in the 600′s is average, and getting loan approval will be hit or miss. The Federal Reserve reports that you are legally entitled to a free copy of your credit score every year from each of the three major credit bureaus, so order yours before you start applying for loans or looking for land so you’ll have a good idea of what you’ll be able to afford.

Get Pre-Qualified or Pre-Approved

After you’ve determined your credit score, you can take the next step, which should probably be either loan pre-approval or pre-qualification. For property purchases, this works in pretty much the exact same way as prequalifying for a mortgage.When you pre-qualify, you are essentially just explaining your financial situation to the lender to get a good idea of approximately how much you can borrow. In most cases, your credit report is not pulled by the lender with a pre-qualification — they just base the amount you might be able to borrow on what you tell them. However, this also means that if you find something you want to buy and your credit and financial situation actually differs on paper from what you’ve reported to the lender, they have the right to not loan you the money even though you were initially pre-qualified. This is why pre-approval is another good option. When you get pre-approved, your credit report is pulled and the lender can tell you for sure how much money you can borrow. This should make you feel more secure when shopping for land because it’s pretty much a guarantee that you’ll be able to borrow the money.

Start Looking for Property

Once you have a good idea of how much money you can definitely borrow, you can start the process of looking for the perfect property to buy. The pre-approval or pre-qualification process — whichever you decided to go with — should make you feel much more confident about whatever you select. However, it’s a good idea not to go too close to the limit. Your lender might have pre-approved you for much more than what you can realistically afford. Don’t be tempted to borrow up to as much as you are able just because you can. You don’t want to wind up in a bad financial situation in the future and end up losing your property.