Information people want to know about Home loans
There are many things one should know before setting out to get a home loan. If you have a good credit score, get your self approved online, as this gives you leverage over others. Know your requirements and your budget. Save money to arrange for the down payment. Have a clear vision of the home you want. If you are not aware of the value of homes in the locality, take the services of an estate agent.
Clearing up your old debts before asking for a home loan helps. The general rule of thumb that banks use is to grant upto 2.5 times your annual gross income. The other rule they use is to set a monthly installment that is 1/3 of your take home pay. The higher you are willing to pay as down payment; the lower is the interest banks will charge on your loan.
If you are running long term debt, banks see your repayment record. Your monthly repayments to settle these debts should not be more than 36% of your monthly income. However, lenders relax a bit if you are ready to pay a large down payment.
If you have already availed a home loan, you can use refinancing to get lower rate of interest. It costs money, so go for it only if you plan to stay for a while in your home. You may also have to pay the prepayment penalty. However, if your record of repayment has been impeccable, you can negotiate with the bank to have them charge lower rate of interest. There are different types of fees banks charge before refinancing, and you must be aware of them. There are Application fee, Appraisal fee, Title search and insurance fee, attorney fee, prepayment fee, etc.
Negotiate with confidence while refinancing. Ask for lower rates of interest. Check if it is fixed or floating rate of interest that will suit you. Always get a ceiling on the rate of interest that the bank will charge.
VA loan- These special loans make it easy for the veterans to avail a home loan. To qualify, you must be a veteran, reservist, on active duty or a surviving spouse of a veteran.
FHA loan- These are designed to make home loans affordable for those who are taking it for the first time.
Taking a home loan for longer period like 30 years is not always advisable. Instead you should opt or a 15-20 year home loan as you can save a lot in terms of interest.