What you need to know before taking a home loan
By Martin Dias
| March 17th 2016
More and more people are turning to home loans or mortgages when acquiring their dream homes. To qualify for a home loan, you need to know and put in place a number of things.
If you are planning to get a home loan, it is important to ensure that you have a good credit record. With credit reference bureau companies now fully operating in the country, banks are able track your credit records with a click of the mouse. So make sure you are credit worthy.
Type of house
But that is not all. As a prospective home buyer, it is advisable to shop around for the kind of a house you want to buy. Compare prices and negotiate if possible. Furthermore, identifying the kind of a home you want makes the transaction process faster and easy. Are you able to pay your monthly home loan instalments? You will need a steady income before approaching any bank for a loan. Every bank will ask for proof of income and financial statements. These documents act as security to the bank since they indicate your ability to repay the loan.
To be on the safe side, save up for a while before approaching a bank for a loan. The savings will help you pay a deposit on your dream home. Most banks require a 10 per cent deposit before they can advance the remaining 90 per cent.
In case you are buying in a new home, you should provide all the necessary documents of your current home. This acts as security and helps to clear any doubts.
Things normally change - at times your nature of work might change; you might be transferred or even shift jobs. If this happens, notify the bank immediately.
Because of the uncertainties of life, it is important to take an insurance cover for a home loan.
Experts advise that anyone one willing to acquire a home through a bank loan should keep all the originals of all pay stubs, bank statements and other important financial documents. Also, ensure that you know whether you want to take a fixed or adjustable mortgage. The beauty of it is that lenders are nowadays flexible and allow people to change their payment plans to what suits them.
During the life of your home loan, don’t increase your liabilities as this will only add to your burden.
Mortgage takers have sometimes raised complaints when banks increase interest rates. To prevent this from happening, it is important to do research before before applying for a home loan. It is important to note that banks have different rates and ways of pricing their products.
Always follow up with your bank to know what is happening. Any change in the financial market should also be followed keenly to enable you adjust with ease.
- The writer is the CEO of FAPCL Group.
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