Most people save funds with the hope of buying a home someday. But properties cost much. Can a person save enough to afford to buy a house only with his savings?
If you have insufficient savings to buy a house, the only option to realize your dream is to apply for a home loan. The lender grants you a loan on the condition that you will repay it within a specific period. But the loan is spread over a prolonged period. That means you have to pay interest on the loan during its tenure. If you pay it off quickly, you stand to gain.
Here are 5 steps that you must take to get the best mortgage loan deal.
1. Credit Score
The mortgage loan interest rates differ in percentage resulting in savings of a few hundred or thousands— depending on your credit score. Higher credit scores reassure lenders that borrowers can repay. If you do not have a high credit score, the lender will not offer you the best mortgage rates. You will then have to pay more because of the term of your mortgage.
2. Hidden Costs
When you buy a property, you must also account for the hidden costs; Registration fee, stamp duty, GST, interiors, and other such expenses cost much. Homebuyers tend to ignore these costs while fixing a budget to buy their new home. That can cost them; The extra charge could plummet them into a financial crunch making monthly payments unaffordable. That can result in a foreclosure of the loan.
3. Research to Find the Lender or Broker
There are many types of mortgage loans and lenders. That makes choosing the right one difficult; mortgage brokers and lenders, retail lenders, and wholesale lenders. Research to know the difference in types to bring down your search to a few. Deciding on the right loan is of equal importance. By choosing the right lender, you will save much of your money. It will also help you obtain the loan faster.
4. Know the Mortgage Loans on Offer
You might know someone who is happy with a particular type of loan. That is not good enough for you to decide that the loan is right for you. Educate yourself about the loans that suit your financial needs and situation. Even if two different types of loans have the same interest rates, check it first. The interest rates may not differ, but that does not mean the two loans will cost the same. Compare each type of loan and their interest rates before you decide on one.
5. Get Your Financial Documents in Order
To secure a loan faster financial documents should be in order even before you apply for a mortgage loan.
Here below is a checklist of documents for a mortgage loan:
- Loan application form.
- 3 photographs passport sized.
- Proof of Identity and residence.
- Bank Account Statement/Passbook for last 6 months.
- Signature verified by bankers of the applicant.
- Statement of assets and liabilities.
- Property documents
- For salaried employees: Original salary certificate and Form 16 or IT Returns for the past 2 financial years.
- Self Employed – Proof of business address, IT returns/Assessment Orders copies of the last 3 years, and proof of Advance Income Tax payment.
Finding the right loan and lender is a challenge. Open up to your lender about your financial status so that they can offer you a product to match. Your research and knowledge will help you to get the best deal on the mortgage loan.