Loan in the simplest of words can be stated as “an amount of money that is to be returned after a period of time with an interest as predetermined at the time of borrowing.” Loan has normally adverse affect on your financial status but certain situations force you to take a loan. It also a fact that there are certain types of loan which if used wisely can turn to be a real boon. Taking loans for business may turn fruitful if it generates income so as to meet with the interest and also make up some extra profit. One such move surely is applying for home loan, as homes are assets whose value keeps on increasing with time.
But certain things are to be noted when it is the matter of applying for home loan so as to ensure that your decision of opting for loan proves to be right. Before applying for home loan, you should be aware of the things which may adversely affect you in claiming the loan.
Things to be avoided before applying for home loan
You should postpone any of the major purchases since it may make you fall short of cash reserve which the bank considers before the approval of your loan. The bank checks whether you are consistent with your jobs so as to ensure your consistency in paying back the loan. So you should not change your job unless the situation badly demands so. A typical lender may ask you to submit before him the bank statements of few previous months. So if you are in a habit of transferring assets between various accounts, avoid that. You should not also consolidate the bills till all the formalities of applying for home loan is over and the loan is sanctioned.
Types of interest rate
In the case of applying for home loan, there are many types of interests. In a normal type of loan, rate of interest doesn’t vary with time and remains fixed throughout the entire period of loan payment. Some banks also avail with an option to reset the rate of interest after a fixed period. The criterion for this varies with bank, the amount and many more factors. Few banks also provides with a provision of switching either to interest rate of floating type or fixed type. So while applying for home loans, be aware of the types of interest rate and make available to you the best option which is capable of satisfying your needs.
Processing and pre-payment charges
Whether you are applying for home loan or for any other type of loans, the bank charges you on the processing such as transactions. If your financial status hikes after some time you can pay back the entire amount before the commencement of tenure. In such a situation, the bank demands you for genuine pre-payment charges. These charges vary depending on the bank and the amount of loan.
Income should be verifiable and ongoing
It is generally seen that mistakes starts to occur from the income part of application. Some of the borrowers don’t feel it necessary to list down alimony or payments of child support which they are possibly to receive in future as income. This is due to lack of awareness in criteria based upon which loans are given to you by the lender, most probably a bank. If you are likely to get more income in future you may be availed with a provision to demand for larger some of money with much lower interest rates and you may get many more favors. Another category of borrowers exaggerates their income through bonuses, overtime, commissions, rental properties or self employment. But to get advantages of these, such sources of extra income should be documented and should also be consistently earned for at least a period of two years. A tendency which is seen among married couples is that only one among them involves in applying for home loan. There are two aspects; if the other person has no source of income, it is better to keep them away when applying for home loan. The other aspect is that if the spouse has an income, including him/her can gain you more amount as loan. If you can find a co-signer who will stand by your side in case of applying for home loan your income part can be boosted but the danger is that your co-signer along with you will be held equally responsible for the repayment of loan. If you are sure that you will not go against ethics, then no problem is there.
Debt should be disclosed fully
Another big mistake which happens among the borrowers while applying for home loan is in regard of filling the application’s debt portion. Some borrowers by mistake put down their payments of credit card on monthly basis in place of minimum required payment in a month. Making huge payments surely is a very advisable financial custom but you need to list only minimum payments on the given application while applying for home loan. Some borrowers don’t disclose certain payments which the law counts as debts and thus reduces the amount to be received as loan.
Never split up the financial situation.
It is never advisable to disrupt the financial situation. A lender usually offers much more attractive rates of interest and terms for the borrowers in case of a stable financial situation. If you are looking forward to give your home for rent, you are supposed to disclose your lender that information so as to avoid future disputes. You should not also suddenly make any visible changes in regard of the financial situation post to your applying for home loan. A typical lender verifies information related to the application submitted by you before the final approval of loan. Any changes may interrupt the process.
For getting a home loan you should follow the advice of your lender with great care. If you are well aware of the proceedings and all the legal aspects of applying for home loan, things will surely move smoother for you and you can easily get your home loan. So seek the help of reliable websites or other sources and if needed, lawyers before applying for home loan.