How to qualify for home loan?

Will I get it? Will I qualify for the loan amount I need? 

Questions, questions, and questions… with no simple answers. Getting home loan approval is not a piece of cake nowadays. Lending institutions/banks go through applications for scrutiny with a fine tooth comb before giving a green signal for your home loan. 

Many people just hear about the lower home prices and drop in current home loan interest rates and hastily make the decision to own a home. However, the process of getting a home loan is slightly different from that of the car loan. As an applicant, you need to identify key differences so that your home loan will get approved. 

Buying a home is somewhat stressful. Further, if you are ill-prepared, then surely it will heighten the anxiety. So, if you do not want to put yourself through this, you need to think from lender’s point of view and edify yourself how to get your loan approved:

• Credit score and credit history: It has a major impact on your home loan approval. High credit scores and good credit history always makes it easy for you to get your home loan approved quickly. You can instantly order credit score and get your credit report. Remember, a credit fraud or low credit score can create hurdles in your mortgage application track. Besides higher credit score requirements, derogatory credit information, missed/delayed payments, can put a full stop on your mortgage approval. Lower your debts and pay your bills on time. This will increase your credit score. If you know your credit report beforehand, you get the time to clean up the record and fix errors in it to keep up a good credit score.
• Income: Your income sources play a key role to determine the amount of loan you are eligible for. Higher income simply spells more chances of you being able to pay the higher liability. In simple words, a person with higher income can pay higher EMI and hence she or he is eligible for a higher loan amount. Criteria are different for salaried, self-employed and business professionals. Different banks/lending institutions have different criteria for eligibility. Furthermore, your profession will also be considered while approving your loan. Banks/loan companies will check if your job comes under risk, negative or stable category and then you will be eligibility will be determined accordingly. Basically, banks/lending institutions seek for the assurance of loan repayment.
• Age: Your age is an important factor for home loan approval, as paying a home loan is a long-term commitment. Thus, at a young age, chances are more to get your home loan approved easily.

Consider Long tenure: your eligibility is increased if you increase your home loan tenure. Remember, Falling within the age criteria does not mean automatic go ahead. There is a maximum limit for some years for which you can take a loan. Maximum tenure limit by the majority of banks/lending institutions is about 20 to 25 years.

It is essential to understand that applying for a home loan is a slightly difficult process. However, with just a little time in research and preparation will let you qualify for the home loan approval at ease. Best of luck!

The Joy of Constructing Your Own Home

The joy of constructing your dream home according to your specific requirements and tastes is unmatched. Whether you are looking to get a home or office constructed, and need to get the cost of the same funded, you need to approach a bank or a housing finance company to get the necessary loan. Using a new construction loan calculator will allow you to know the amount of loan you require or are eligible to get for funding the construction of your new home. A unique feature about construction loans is that they are not disbursed in one go. Instead their disbursal is linked to the various stages of completion. Also, the borrower pays interest on the money actually used and not the total loan amount.

Understanding New Construction Loans

 

These are short term loans that enable borrower to fund the construction cost of a house or an office. Once the construction is completed the owner of the property needs to get a permanent loan and use the same to pay off the interim new construction loan.

These loans differ from the standard mortgage loans in terms of their release. New construction loans use a draw system of payouts wherein the lender pays the proceeds of the loan at specified intervals after verifying the amount of the work completed on the concerned project. This verification is done by lender’s own staff or a third party appraiser authorized by the lending agency.

Types of New Construction Loans

 

New construction loans can be taken by builders or individuals getting their own houses built. Loans to builders are given out when they are building homes for clients or rebuilding a home for sale upon completion. The loan amount is subject to limits based on a specific percent of the value or the purchase price of the home and can be easily be calculated by using a new construction loan calculator.

Individuals owning a plot and looking to fund the cost of construction on the same may also apply for new construction loans, provided they submit the requisite building plans and copies of necessary approvals from the authorities. And once the home is built, the owner needs to get a mortgage on the built property to pay off the construction debt.

Another option is a construction-to-permanent loan. Such loans typically require two closings with two separate sets of legal documents. The first is to obtain new construction loan and the second is for the permanent funding on completion of the construction.

Some lenders, however, may allow one time closing for construction to permanent loans. Such loans are highly advantageous, as they involve only one set of closing costs and lock in the interest rate at the time of loan sanction. This option is very lucrative in an era of rising interest rates. This type of construction loan automatically converts to a permanent phase once construction is complete. The qualification for such loan is difficult due to the absence of the completed house as collateral to back the loan during the construction period.

A new loan construction calculator can help you decide the amount and the terms of the loan on the basis of the estimated cost, time of completion and on the percentage of your contribution to the construction cost.