3 Things A First Time Home Loan Applicant Must Be Aware Of

Home loan application processes are long and most first time applicants are not aware of all the aspects of a home loan. Before applying for such a loan it is crucial for the applicant to conduct their own research so that they understand the minute aspects of a home loan. This will help them not only in the application process but also during the repayment of the loan. There are however three things in particular that each home loan applicant must be aware of:

Home loan eligibility

Before one applies for a home loan with a financial institution it is important for the individual to check whether or not they are eligible for the loan amount they plan to apply for. Most financial institutions provide home loan eligibility calculators which allow individuals to check whether or not they are eligible for the loan they are applying for. In doing so, one reduces the risk of their application being rejected by any financial institution. The home loan eligibility calculator required individuals to put in their monthly income and the interest rate and tenure of their choice. Using this information the calculator will show how much loan amount the individual is eligible for based on their income.

Credit score

Credit score plays a major role in the deciding factor of whether or not the individual’s home loan application will be approved or not. An individual’s credit score provides the financial institution with information about their spending habits, past loans, credit cards owned and defaults which have occurred in the past on loans. A low credit score may force financial institutions to either reject the individual’s home loan application or reduce the loan amount being issued. However, to improve one’s home loan eligibility, one can take a number of steps to increase their credit score. Reducing monthly expenditure and the number of credit cards you own and repaying any outstanding loans can help boost your credit score.

Type of interest

Once the home loan application has been approved one of the biggest decisions any home loan applicant has to make is in regard to the type of interest to choose. Most financial institutions offer their home loan applicants with the choice between fixed and floating interest rate. While a fixed rate of interest offers more security, a floating interest rate can make the loan repayment an affordable option. Hence the decision lies with the individual and what their expectations are from the home loan.

All home loan applicants should be aware about the details of the loan to ensure that they are ale to get the most affordable home loan available.