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So you have finalized on your very first dream home and are all set to purchase it. You want to apply for a home loan but once you get down to it, you end up confused and overwhelmed. The amount of information and the number of lenders in the market are huge and you simply don’t know where to start.
Below are a few tips that could ease out the process for you.
1. Do your homework about the lender
You could either approach a home loan organization on your own or you could look for a loan broker who could help you out with the same. However, this will cost you more as you will have to pay a commission to the agent as well. Most loan borrowers prefer approaching the bank or loan lending on their own without any middleman. However in case of scenarios like if your credit score is not good and a reputed bank rejects your loan application, a loan broker may be able to arrange a loan for you.
2. Stay updated on the current rates
It is very important to stay updated on the current AAPR. This covers all angles when it comes to your loan-related expenses. However, you cannot depend on the AAPR alone. You can consider it as a parameter to select a loan provider. Once you have shortlisted a couple of providers, you will still have to look closely at the different elements of the provider. There is enough data available to help you make a quick shortlist.
3. Understand the various terms associated with loans
When you read up on home loans, you will find a lot of financial jargon. It is important to understand what those words mean so that you are able to make the right choice and are not taken by surprise later. Many loan providers actually offer workshops so that you can understand these basics better. We have put down a few terms below.
APR – this is the annual rate which usually should mirror the cost of acquisition.
Closing Costs – They usually include both non-repeating costs and prepaid costs. Non-repeating ones are one-time costs incurred while acquiring a loan. Prepaid costs may be repetitive in nature like property charges etc.
Collateral – Something that is used to assure repayment of the loan. If the loan is not repaid, the borrower will lose the collateral.
4. Check your credit score
Your credit score and records are always checked before your loan application gets approved. A good credit score and clean records will get to your loan application getting approved. If there is any mistake in the credit score, get it rectified. It also is good to clear off any outstanding dues before getting your final credit score. This process is a time consuming one so make sure it is done well in advance.
5. Don’t be disheartened by a low credit score
There may be unavoidable circumstances at times like a medical emergency, pay loss, etc. which may have resulted in a bad credit score. In such cases, it is best to appraise the loan broker of the situation. He may be able to still get you a loan. Other organizations like Christensen Financial may also be able to help you out. They offer loans at competitive rates. You could also ask some banks what you can do to ensure your loan application gets approved.
6. Clarify all possible details
The process of applying for a loan is a lengthy one. Right from shortlisting a provider, getting an endorsement letter, getting your credit score verified, getting your loan application approved to finally getting the funds is bound to take time. At every step, ensure that you clarify all your doubts and verify details. Keep the entire essential paperwork ready at your end (credit score, employment details, education details, regular spends records like bills, lease, rent, etc.) well in advance. This will help speed up the process.