Are You Prepared for a Home Loan?
For any homeowner, old or new, it’s essential to have a home finance budget. Unless you’re loaded with cash, it’s quite impossible to pay for a house out of your savings; thus, you have to take out a home loan.
What you need to do is figure out whether you should take that step at all. To get a home loan, you must be prepared to make a deposit at the bank you’re borrowing from. This deposit is a small percentage of the sum you’re borrowing, and it can be hefty or small, depending on the price of the house you’re looking to buy.
“My grandfather used to say ‘It is my house, I am paying the bills,’
my dad used to say ‘this is my house, I pay the mortgage,’
my generation is saying this is my house, I pay the rent.”
― Csaba Gabor-B
Are You Ready to Put Down the Deposit?
Your first move toward getting a home loan is to map out exactly how much you need to borrow to buy the house you want and if you have enough savings to pay the deposit. If you find that you don’t have enough savings for this purpose, then you’re not yet ready to get a home loan.
However, if you do find that you can pay the deposit fees, then you should go ahead and work out a budget for buying your home. Home loans involve repayments in installments along with interest.
Do You Check All the Boxes in the Eligibility Criteria?
Now that you know you can put down a deposit and have enough income to be able to sustain you while you pay your installments, it is important to know what all is generally considered.
Your eligibility – to get a home loan, the amount, and the interest rate – is based on your income, meaning your repayment capacity, to begin with. Other factors that play an important role include your age, financial position, credit score, number of dependents, spouse’s income, and job stability.
If you, the borrower has a low debt-to-income ratio coupled with minimal financial obligations and excellent credit scores, then you are more likely to qualify for the best mortgage terms.
Every lender you are going to check out is likely to use its own calculation to determine your eligibility for a home loan. The calculations based on your situation also determine the mortgage payment you’ll be required to pay each month. This is how the number of years you have to pay it back in is decided.
Keeping all that in mind, you should make a note of your income and expenditure, and find out how much you can afford to spend on buying a home. Once you’ve fixed the budget, you should try your best not to go overboard, or you’ll have trouble paying back the loan later on.