Need A Home Loan? Here’s What You Need To Do
The work of a serious homebuyer begins in a lender’s office. Unless you are some filthy-rich millionaire you cannot afford to have ‘your people’ do all the work and paperwork on your behalf. You probably also need a home loan to get your bearings, otherwise you will be unable to get that house you so desire. Why? Because you will lack full down payment options due to insufficient dough, moolah, money; you get the idea.
There is nothing to feel low about, in fact the harder you work to land your new home the more you will value it in the years to come and the more inspired you will be to pay off its EMIs and clear that debt. That house will finally be all yours at the end of this maze. The statistics we share below can vary from country to country; we stuck in some American examples here and there to reveal current market standards and where India could be heading in the near future.
- First, sit down for a consultation, discuss budgeting, and loan options with your lender
- The lender works on your behalf to see if your desired home is credit-worthy and if its current owners are not neck-deep in debt or other problems. A lot of strange factors can devalue homes, you have no idea the stories these lenders can tell you
- Through the talks you gain keener insight into how much you can borrow and what the house’s price range is
- Then the lender turns the tables and targets you
A. Pre-Qualification & Pre-Approval
The former is simple; it is how much you can afford for the home loan. The latter, however, is slightly more multi-layered. The lender needs to check your credit status and documentation. They usually take about 90 days to approve a certain loan amount and carry out an appraisal. Only after this is approval possible.
B. Proof of Income
You must have seen this coming, so don’t raise those eyebrows. Keep statements ready, the past two years will do just fine. Year-to-date income, pay stubs, any additional income (proof is needed) like bonuses and alimony, and tax returns from the latest two years. It may seem like a lot but then again you are buying a home, which is quite a big responsibility.
C. Proof of Assets
Investment account statements and bank statements will need to be brought to the fore. This is proof that you can handle the down payment, not to forget the closing costs and cash reserves. Depending on the loan program you have chosen, a typical home loan can cost you 10-20% down payment. If some of these funds are given to you by family or friends, you need gift letters to show that it is not technically a loan unless it is (relatives, you never can tell).
D. Proof of Employment
Similar to income but slightly different. You can earn an income but not necessarily be employed, in the conventional sense. If you are, then you shouldn’t begrudge your lender the chance to call and ask after verification from none other than your employer. Changed jobs? How clever of you, you still won’t escape, your lender will call your previous employer; and you thought your boss was tough. Self-employed? You are looking at quite a lot of paperwork (income and business related), so cancel that appointment, nay cancel all appointments for the week, and reach for those reading glasses.
Needless to say, your credit needs to be in tip-top shape. If your CIBIL report shows 740 or over, you can avail the lowest interest rates for your home loan and the lender will even deign to grace you with a broad grin. The lower the score the more you will need to do to pay back the loan; and the lender will be in various stages of frowning. Recently, those scoring as low as 580 also have a hefty down payment to look forward to. It’s not you; it’s how risky you are. Sometimes the minimum compulsory score to avail a home loan is 620.
This is the crux of the process to landing a home loan. Paperwork is going to plague you for a while but that’s only to be expected. From a copy of your driver’s license to other IDs like Social Security Numbers and so on, you will need to obey your lender in all things; within reason, of course. Your mortgage is on the line, so be patient and do what you need to do. Bite back on any complaints and if you want to swear out loud, make sure the lender is not near enough to hear.