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Before You Borrow – Things First Time Home Loan Applicants Must Keep In Mind
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Applying for a home loan must never be taken lightly. It is extremely important for an applicant to research on home loans before applying to any bank. There are several things that a first time home loan applicant must keep in mind before applying for a home loan:
Before you apply for a home loan, one must check if they are eligible for the loan amount they are applying for. Most banks provide online home loan eligibility calculators. This device provides the applicant with an idea as to how much loan amount they are eligible for. The home loan eligibility calculator takes into account one’s salary, monthly expenditure, the amount of interest they wish to pay and the tenure of the loan.
2. Credit score
An applicant’s credit score provides a bank with detailed information about the applicant’s buying habits, defaults on loans and any current loans they are liable to. An applicant must find out their credit score and if it is low, try to improve it before applying for a home loan. A low credit score may cause a bank to reject your home loan application.
3. Interest rate
Interest rate plays a vital role in the home loan process. A home loan applicant must try to reduce the interest rate charged. A high interest rate may put a lot of financial pressure on the applicant in the future. Also, a low interest rate reduces the chances of any defaults occurring. Defaults in the repayment of your home loan can seriously affect your credit score in the future and hence an applicant must ensure that he repays the loan amount each month on time.
Another thing that an applicant must be aware of is that many banks offer the choice of opting for a fixed or a floating rate of interest. A floating interest rate means that the interest charged each month varies depending on the market rates. Any applicant must conduct a detailed analysis before they choose any type of interest rate.
4. Tenure of loan
The tenure of the loan must also be chosen with care. The reason being that in the first few months, the borrower is repaying more of the interest amount rather than the principal loan amount each month. If a borrower plans on repaying the loan in full at some point they must avoid selecting a longer tenure period as it may cause a borrower to shell out more money.
So before one applies for a loan they must always use a home loan eligibility calculator to check how much loan are they eligible for. Based on this knowledge they can take steps to improve their eligibility and get the loan amount of their choice.
Author Bio :
The author is a seasoned writer on finance topics and she articulates aspects that are important to people availing the home loan process facility. She writes about a variety of topics covering the home loan documents, rates & the uses of Home loan eligibility calculators that help to make the best decision.
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