There are people who save up all through their lives to buy their houses using only their own funds. Then there are those who don’t want to wait for all their lives to buy your dream house. If you belong to the latter category, chances are that you will be taking the home loan route. Due to large amounts involved, home loan application process is quite cumbersome.
It is also advisable to be aware of the common pitfalls and issues faced by other people. Here we discuss some of the main issues faced by home loan seekers and offer some home loan tips:
Lenders check your credit score even before they start processing your loan application. So if you don’t have a decent credit record, i.e. your credit score is not good, then there is no point applying for the loan as it will be rejected outright.
Home loan application requires a lot of paperwork from the borrower. So make sure that you clearly understand what documents are required and in which formats. Unless your documents are in the required order and format, lenders might ask you to resubmit your application. This will only add to your troubles and processing time.
Fixed / Floating Rate
Lenders might not even allow the borrowers to freely choose their preferred interest rate type. There have been instances where borrower chose fixed rate at the time of applying for loan. But lenders allow the rate to be fixed for first few years and then switch to floating rate without any intimation and because, the same was mentioned in fine prints of the loan documents.
When you apply for a home loan, the lenders charge a fixed amount (around 0.25% to 1%) as processing fees. This amount is non-refundable and you will lose it if your application is rejected. Since home loans involve large amounts of money, 1% could be a huge number. So it’s always better to get a fair idea whether you loan will be approved or not by checking you credit score, current loan obligations, downpayment, etc.
Lenders generally require 15% to 20% of the loan amount to be paid as the down payment by borrower. In case the amount is not available with the borrower, banks might reject the loan application. Hence, make sure to have sufficient down payment available with you when you are looking to apply for a home loan.
These are some of the common pitfalls that you need to protect yourself from. It’s also very important to understand the detailed terms and conditions, i.e. fine prints of the loan documents before you sign on the dotted line.