Applying a Home Loan
Everybody wants to have their own home. Living in a home that is owned by us has a different feeling than living on rent. If you have sufficient money to buy a home then it’s perfectly fine, otherwise, you have to look for alternative means such as home loans or mortgage.
Applying for a home loan can be very difficult, especially if you are a first-time buyer. There are a lot of things that you need to research and prepare before taking out a loan for your dream home.
This article will let you through the way towards obtaining loans for your home and you can understand that applying for a home loan is not as difficult as perceived by many people.
Check Your Credit Score
Your credit score plays an important role in obtaining any loan. When you apply for a home loan, all your previous records as a borrower will be checked by the respective lender. If your credit score is good then getting the approval of your loan application is very high.
On the other hand, if your credit score is not at par with the lender’s criteria, your application might get rejected or you might get a loan albeit at a higher rate of interest.
Whether you have a good credit score or horrible credit record in the past, what you need to do is to check your credit score before your lender does so. You can get your credit report from any credit rating agency.
After checking the report, if you see any error on it, contact the rating agencies and correct those errors. This process sometimes takes too much time; hence it is better to do it in advance.
If you have any outstanding bill payments such as credit card bills, utility bills, etc then try to pay them off very soon, it will have some positive impact on your score.
Bad Credit Score is Not a Hurdle
Many people think that it is impossible to get a home loan with a bad credit record. There are many reasons behind an indecent credit score. Your credit score might have become bad due to some unavoidable situations, for instance, some illness or job loss, explain your situations to your lender and try to convince them about your past experience. Tell them that you are in a sound financial state now and will repay the loan on time.
There are other sources of taking a loan if you have a low credit score. You can approach a direct lender who provides financial assistance to people with an adverse credit score. There are many such lenders available in the lending market.
If you don’t want to pay for any lender or broker here you can purchase a home without a lender help by owner financing.
Enquiry about the Lender or Broker
There are two ways to apply for a loan.
First, you can directly approach a loan specialist who deals in home loans or institutions that assist people with financial help for a home purchase.
The second option is a loan broker. You can contact a loan broker who can help you with different moneylenders available in the market.
Most people prefer the first option as they think that it is not much expensive to choose a loan specialist. Furthermore, to find a good broker, you have to do proper research and get some references as well. That is the main reason many people like to directly approach a lender and manage it on their own.
But in some cases, a solid loan broker can be very helpful. For example, your history regarding loan repayment is not good and a skilled broker might be helpful in arranging the deal for you.
Other situation may be loans for people on benefits. As these people have a very limited amount of money so getting a loan might be impossible for them. Here also an accomplished broker can be very helpful.
Know the Exact Rates
Many lenders publicize a rate which is not really the one which borrowers think. The APR or Annual Percentage Rate is something that you should look for to know the exact cost of your loan. It provides full details of all costs that you have to incur over the term of your loan. Hence, it is always better to ask for an APR while choosing any loan.
Loan Details and Terms
When looking for a home loan and going through various terms and conditions, you come across many words related to loans and finance that you find difficult to understand. It is important for you to understand all those words very clearly to secure a better deal. Here we have compiled a few terms that you are supposed to know:
- APR or Annual Percentage Rate: It is the yearly rate i.e. yearly cost of getting a loan over the term of the loan.
- Closing Cost: It is charged by lenders when you buy a home through a home loan. Closing is a point when the ownership of the property is transferred from the seller to the buyer. Either the buyer or the seller has to pay the closing cost.
- Collateral: Collateral or security is something that you use to secure your loan. In the case of a home loan, your home acts as security for lenders. You can lose your home if you fail to pay the loan amount on time.
- Terms and Conditions: You need to understand the terms and conditions of the loan very carefully. In case of any confusion, as the lender again and clarify then and there.
Overall it can be said that taking a home loan is not an arduous task as believed by many. If you spend some time in proper research and contact a few lenders, then you can easily secure the best deal for you. The only thing which you need to pay more attention to is on the rate of interest and terms and conditions. Also, timely payment is very important.