There is nothing as fulfilling and rewarding as having a home of your own. Each individual wants to have a home where he can create his world and live peacefully. It is also one of the biggest financial decisions you are going to make in your life and hence, you need to ensure that you get all your queries answered and there is no place for any confusions.
When you have made your mind to buy a home, your next step is to acquire a home loan at best interests in the market. It is quite impossible to buy a new home with your savings unless you have got a place in the list of the world’s most rich people. If you look around, you will find many banks and financial institutions offering home loans. However, first of all, you need to do your own research and then start applying or approaching those banks.
Here is a list of things you need to know before you go for a home loan.
1. Check whether you are eligible for a home loan
Yes, it is very important to know whether you are eligible to get a home loan. You need to qualify for the home loan as banks too want to check whether you are capable of paying off the loan. The bank will ask for your income documents, repayment capacity, your dependents, job stability and other important considerations before offering you a loan. What you can do is to check these things by yourself. Surf through websites of banks and check out which documents they ask for home loans and prepare a list and procure the latest documents so it will save time.
2. Know about types of home loans
There is a number of home loans available for you. You need to choose the best one that fulfils your financial goals and purposes. Here is a list.
Adjustable-rate loans
Here, the interest rate is not fixed and changes with the lender’s benchmark rate. If this rate is changed, the interest rate would also change.
Fixed-rate loans
Here, the interest rate is fixed from the moment you take the loan till the tenure of the loan. No parameters can change the interest rate during the tenure of the loan.
Combination loans
Here, a part of the loan is fixed and another part of the loan is variable and adjustable.
3. Get a pre-approved loan to avoid hassles
Experts suggest getting a pre-approved loan before you finalize the home. If you have a pre-approved loan, it will make your home search smarter and focused. Also, when you sit with the bank officials for the pre-approval loan, you would be able to negotiate better. You would be able to get to see properties which suit your requirements and financial goals.
4. Decide the loan amount
Yes, choosing a loan amount before you approach for a home loan is extremely important. Many individuals make this mistake as they don’t have any idea about the loan amount they are looking for. Generally, most of the banks offer 70 to 90 per cent of the total amount as the home loan. For example, if your home worth $50,000, you would be able to get a loan of approximately $40,000. You need to do all this homework before you apply for a home loan to settle things and make the process quick and hassle-free.
5. How much your home loan costs you?
This is also a very important question you need to ask to check before applying for a home loan. The total cost of the home loan would include interest payments, administration charges, processing fees, penalties, agent’s fees is you have hired one. Beware of the companies and financial institutions who charge some hidden fees that are not discussed with. Read the loan agreement carefully and in detail to ensure that.
6. Tenure of the loan
How long you want to pay for your home loan? When will you stop paying for your home loan? The tenure of the loan is very important as it will affect your financial goals and planning. Generally, people want to go for a shorter repayment period as they want to get rid of the home loan as soon as possible, but you need to give a thought on that. Short repayment periods are also good as you will end up paying less home interest amounts as you are quickly paying the loan. However, when you go for a shorter repayment period, your monthly EMIs will increase to a significant number. Your home loan cost would decrease.
7. Down payment
The down payment is the total sum of the money that you pay to the seller before taking possession of the home. The amount is 10 to 15% of the total home loan amount and the rest of the amount is converted into EMIs. Do you have enough savings to pay for the down payment amount? If not, discuss this thing with the bank and they will help you resolve this issue. If you have enough surplus savings, it is advisable to increase your down payment amount to save some interest that you are going to pay in the future.
8. Documentation
If you have hired an agent for the home loan, ask him about the documents that will be asked by the banks. The list might include your employment proof, your bank statements, documents of other loans you have taken such as personal loan, vehicle loan and others, your spouse’s income proof and other crucial documents. Keep these documents handy so when you can submit them any time they want.
Getting a home loan is a simple process and does not take more time when you have a good credit score and steady income. Hire a home loan agent when you don’t have enough time to research about the nature of home loans and other things. an agent will guide you throughout the process.