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Home Loan

The home buying process may seem complicated; however, if you take things one step at a time, and are able to discern the home loan most appropriate to your requirements, you could soon be holding the keys to your new home!

Steps for buying a home
Establish how much you can afford; this depends on your income, credit rating, current monthly expenses, down payment and interest rate. The calculators can help, but it may be wise to visit a lender and confirm the amount. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment.

Know your rights

Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.

Learn about home buying programs
Shop for a home. Choose a real estate agent and compile a list featuring your requirements what features do you want. The list may come in handy during the selection process whilst comparing the various homes in the market.

Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.

Get a home inspection. Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.

Shop for homeowners insurance Lenders require that you have homeowners insurance. Be sure to shop around in order to procure the best deal.

Sign papers. You’re finally ready to go to “settlement” or “closing.” Be sure to read everything before you sign!

The House is yours now.

Terms used in Housing Finance

EMI: Equated Monthly Installment till the loan is paid back. It consists of a portion of interest and the principal

Floating Rate of interest: Rate of interest which varies with the market lending rate. This means that there is an element of risk of paying more than budgeted amount in case the lending rates goes up

Monthly Reducing balance: In this system interest reduces monthly with repayment of Principal amount
Annual Reducing Balance: In this system principal is reduced annually at the end of the year so you end up paying interest even for the portion of principal you have actually paid back

Fixed rate of interest
: Rate of interest remains unchanged throughout the period of the loan

Processing charge: It’s a fee payable to the lender on applying for the loan
Prepayment Penalties: When loan is paid back before the agreed term of the loan, then banks/ institutions charge penalty for the prepayment

Commitment Fee: Some institution charge commitment fee in case the loan is not availed within a stipulated period, after it is processed and sanctioned

Miscellaneous Cost: It is quite possible that some lenders may charge documentation or consultant charges.

Categories: Home Loans