Most of the first time home-buyers opt for home loans from banks, thus it is paramount that you understand everything that there is to know about it. It is a huge commitment which will take you several years to repay.
- Eligibility Criteria – The first thing that the bank will check once you show your interest in a home loan is your Credit History. Thus it is important for you to get it first and make sure it is enough to avail a loan. In order to qualify for a loan, the bank will also ask you your age, qualification, financial position, number of dependents, spouse’s income and job stability.
- Types of Loans
- Fixed Rate Loan: In this loan, the rate of interest is fixed at the time of taking the loan and remains the same throughout the loan period.
- Adjustable/Floating Rate Loans: This loan type has interest rate linked to the lender’s benchmark rate. If there is a change in the benchmark rate, the interest rate also changes proportionately.
- Combination Loans: Such loans offer a part of the loan at a fixed rate of interest and part at an adjustable or floating rate of interest.What comes first? Home or Loan – Pre-approved home loans are advisable to first time home buyers as it fixes up your budget and helps you do more focused research. This also assists you in negotiating and closing the deals faster. The lender approved projects, not only relaxes the number of property documents needed by the lender, but also assures you of the quality of the projects.
Loan Amount – Depending on your loan value and as per the regulator, most lenders provide a housing loan ranging from 75 to 90 percent of the cost of the house. In case you decide to include a co-applicant his/her income can be considered by the lender to increase the loan amount. Co-applicant can be your adult child, parent or spouse.
- Home Loan cost – You should ask the lender about the cost of the loan. This would include interest payments, processing fees, administrative charges, prepayment penalties, etc. Ideally adjustable/floating rate loans do not attract any prepayment charges. Make sure there are no hidden charges. As per the regulator, all the fees and charges levied by the lender should be disclosed on the website.
Insurance – A loan cover term assurance plan will help you cover your loan amount. The insurance will relieve your family from the liability of an outstanding loan as the loan is repaid by the insurance company in case something unfortunate happens to you. Do your research and find the best loan cover available for you.