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4 Tips To Get The Best Home Loan

Written by Posted On Thursday, 22 February 2018 01:31

Getting a home loan is the first step to fulfilling your property-buying dreams. And it is also the most difficult one, as it entails a ton of research and negotiation.

With so many banks and financial institutions ready to offer home loans to the right buyers, it's important to learn to navigate through this maze to zero-in on the one that best fits your needs.

Here are some tips that can fetch you the best home loan at the terms and conditions you want.

Cheapest is not always the best

A cardinal mistake is to choose home loans based on interest rates alone. Remember, the cheapest loan may not always be the best, as it can come with high processing fees or inflexible payment terms that will make you spend more money than what you had planned.

To avoid such hidden charge and conditions, go through the interest rates as well as the associated terms and conditions thoroughly before choosing a home loan. Never look through a list and pick the cheapest loan.

Floating vs fixed rate

When it comes to home loans, there are two options - floating interest loans and fixed interest loans. As the name suggests, the interest rate remains unchanged throughout the loan period in the case of fixed rates while the rates go up and down based on market conditions, in a floating rate loan.

Both of these loans comes with its own set of advantages and disadvantages, so you have to choose the one that best fits your needs. Fixed rate loans come with a high foreclosure penalty while floating rates can make it difficult to plan your monthly mortgage amount. So, if you don't plan to foreclose early and if you borrow at a time when the rates are low, fixed is a good choice. In all other cases, a floating rate works better.

Credit score

Your credit score has a big bearing on the interest rates. In general, a high credit score will fetch low interest rates and vice-versa. Some banks even have a minimum credit score to qualify for a home loan. For example, Freddie Mac requires a minimum credit score of 620 to qualify while VA Loans has no minimum score at all.

If you plan to buy a house within the next year or so, it's a good idea to start working on your credit score to boost your chances of getting a home loan. Read through credit guides for house loans and talk to different institutions to get an idea of what you can do to boost your credit score.

Negotiate

Negotiate hard when it comes to bank loans. Have a list of things that are important for you such as no penalty on pre-closure, tenure of the loan, loan processing charges, processing time and other pertinent factors. Bargain on these aspects too besides the home loan rates.

Always make sure you have the best terms and conditions for your loan, so you can repay them conveniently. Above everything, keep some savings for emergency.

We hope the above tips help you to get the best home loans to buy your dream home.

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Martina Angel is a writer and real estate agent. She is especially interested in the purchase, ownership, management, rental and sale of real estate for profit. She also volunteers for local water conservation charities in her free time.

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