tips for a home loan

Purchasing a house will become one of the biggest expenses of the entire life. The mortgage is the thing that you will deal with for the next years. Therefore, your attitude to choosing a mortgage loan and a lender should be as responsible as possible.

Five crucial things will help you to get prepared to mortgage and succeed in the repayment process. By following this simple guideline from Personal Money Service a loan referral site, you will manage to go through the mortgage without stress and unpredictable troubles.

Getting Prepared: Fixing Your Eligibility

The first thing you should do before contacting a lender is to understand your eligibility criteria. It depends on the income and repayment capacity. Usually, lenders turn to such criteria as age, qualification, the number of dependents, total family income and job stability.

Getting Prepared: Choosing a Loan

It happens that a borrower doesn’t qualify for a home loan. In such cases, he can consider another type of the loan. There are three major types of mortgage:

  • Adjustable Floating interest rate. These loans are bound to the borrower’s benchmark rate. Interest rate of the loan changes proportionally to the benchmark rate.
  • Fixed Rate Loan is a loan with a stable interest rate throughout the whole repayment period.
  • Combination Loans that combine terms of the aforementioned loans.

After you decided on the loan, you should turn to the pre-approved process. During this period, you can understand what documents you need to gather before application, what exact terms to expect, what properties are available in your area. You simply can figure out the crucial details and be prepared to sharp turns.

Getting Prepared: Defining Loan Amount and Loan Cost

Loan amount and the loan cost are the other important terms for future borrowers. The loan amount is the entire cost of loan that a borrower agrees to pay back. Loan cost is the cost of the interest rate payments, administrative charges, prepayment penalties, additional fees, etc.

An ideal home loan is a loan with zero prepayment charges for adjustable/floating rate loans. You should also remember that it’s possible to reach a lower interest rate by paying a nominal fee.

Getting Prepared: Crucial Details

Borrowers can fall into a trap with the hidden fees. Lenders should disclose such information but some of them avoid it trying to make money on your distraction. Therefore, apply to the official calculator on the website of the lending company or ask about hidden fees directly.

Every borrower will also deal with EMI and pre-EMI payments. EMI stands for Equated Monthly Installment. It contains regular principal amount plus the monthly interest rate.

Pre-EMI exists for properties that are still under construction. In such case, the lender will divide a loan into installments depending on the entire amount.

The last important issue to consider before applying for a mortgage is tenure. Usually repayment period of the home loan lasts for 30 years. In some cases, it’s possible to extend it and facilitate monthly payments.

Such details depend on how you will negotiate with your lender. Therefore, it’s important to choose a reliable lender ready to consider your expectations. Check out the reviews of the potential lending companies beforehand.

Important Issue: Documentation

Every borrower has to prepare three groups of documents for a mortgage:

  • KYC documents: identity and address proofs (sometimes also a valid passport, voter ID card).
  • Credit/income documents: salary slips of the last three months for employed borrowers, income tax returns along with computation of income of the last three years for self-employed. If you are unemployed, you need to look for the special group of people that deals with such cases. Also, read how to get mortgage with a bad credit score.
  • Property documents: sell agreement, the title deeds, etc.

mortgage loan documentationWhile mortgage, you will also deal with insurance cover. Borrowers purchase a loan cover term assurance plan to insure the loan amount. Such plans are important to protect yourself from the outstanding loan. In such cases, a lending company will pay off the debt.

Still, it’s crucial to find the right insurance company. For this purpose, you should just check out a couple of reputable reviews.

The last thing to keep in mind is to pay the EMI payments regularly. Every lender has a right to take action against default without an intervention of courts if the borrower misses more than three payments.

If you have financial difficulties, it’s better to negotiate with your lender and find reasonable solutions.

P.S.: Read the FHA mortgage guidelines here.