Buying a dream home is one of the most significant investments one can make in their lifetime. And in most cases, people use home loans as their financing option when buying a home.
While taking a loan may seem easy, getting the best home loan option is an uphill task. You have to research widely and prepare everything well in advance to avoid disappointments when servicing your loan.
But worry not, as this article highlights some crucial things you should know before getting a home loan.
Compare Multiple Home Loan Lenders
Settling on the first home loan lender that comes your way isn’t a wise move. You need first to compare rates, fees, and terms from multiple lenders so you can settle on the best option available.
More importantly, try to find a lender that offers the most convenient and prompt communication, whether through text, in person, or online.
While comparison shopping will help you find the best and save thousands of dollars, identifying good home loan lenders is no small feat. The good news is that iSelect home loan comparison tool can help you see what some of the best lenders in Australia have to offer.
Understand Factors That May Affect Your Eligibility
Most lenders will consider several factors before approving your home loan. Your debt-to-income ratio is one factor that will dictate the possibility of getting a loan, meaning your eligibility will go down if you have other existing debts.
In addition, some banks may look at your job stability. For example, it is easier for a person with a stable source of income to get a loan than a self-employed individual with unpredictable earnings.
Also, age may affect your eligibility to get a home loan. Typically loan tenures should not go past retirement age unless you have a younger co-applicant. Some banks may deny you a loan if you have more dependents, as that’s likely to lower your capacity to repay the loan.
Cost of Your Home Loan
Just like buying any product or service, cost plays a crucial role in getting a home loan. You must first know the home loan cost to assess if it is suitable for you.
The cost may include interest payments, administrative charges, processing fees, and prepayment penalties. Ideally, your home loan should not have prepayment charges for floating-rate loans.
Also, you should ensure there are no hidden charges that may make the loan costlier. It is, therefore, advisable to take a loan from transparent lenders who are transparent about important information such as costs and fees.
It’s Possible to Negotiate the Rate
Whichever type of loan you choose, know that you can negotiate the loan amount and interest rate. Although the bank will always have the upper hand, you can bargain, especially if you have a good credit history or are a long-term customer with a good relationship with the bank.
Additionally, you may want to try applying for a loan at the end of the month. Most banks have monthly targets and may be willing to give out loans to hit those targets.
Read the Fine Print
A home loan agreement is a legal document, and so often, it may be beyond your understanding.
However, you must read the loan agreement document and understand everything before appending your signature.
There may be quite a few details that can affect you in the future if you are not careful. For example, some lending firms have a security clause that permits the lender to demand additional security accompanied by your loan amount if the property’s prices fall.
If you fail to pay this security, you will be marked as a defaulter.
Therefore, be sure to seek clarification for what you don’t seem to understand or talk to a home loan attorney to avoid legal issues and disputes in the future.