Are you a little scared to make your first-ever investment in residential real estate? Or are you afraid to make the wrong financial choice? Worry no more!! The home loan interest rates are at an all-time low primarily due to the COVID-19 pandemic, which signifies it is an ideal time to make mortgage loans for first-time buyers. Taking a home loan is the most significant decision in one’s life, which is why it is essential to make wise and calculated financial decisions. However, there are a few factors that must be considered before signing up for a home loan, including:
1. Have a decent credit score
Your credit score is the primary and most important factor considered by lenders when you apply for a home loan. Borrowers with a credit score of 750 or above are likely to quickly get the desired loan amount. They can also enjoy lower interest rates on the loan amount. This is because a high credit score tells the lenders that you have been a responsible buyer in the past and will continue to do so in the future as well. Thus, if your crest score is low, improve it before applying for a large loan amount.
2. Consider your affordability
Before drooling upon your favorite residential property, it is essential to determine whether your earnings can support such expensive space or not. Using a monthly mortgage calculator, you can calculate the EMIs on a particular loan amount and consider applying for the loan accordingly. If the EMIs are more than your affordability or repayment capacity, consider going for a less expensive residential space. Choosing to buy a property that falls out of your budget leads to higher monthly payments, and the borrowers are likely to default on the loan amount.
3. Choose long loan tenures
As buying a home is quite an expensive investment, it is advisable for first-time homebuyers to choose a longer loan term. This helps the home buyers to address their current & future commitments while planning their EMIs. As you increase your monthly income or income sources, you can consider increasing the EMIs, to pay off the loan amount sooner. In addition, if you have additional cash, paying a huge down payment can also be beneficial. The down payment amount is subtracted from the desired loan leading to lower monthly EMIs. This takes us to our next point.
4. Making a huge down payment
As discussed earlier, a higher down payment amount leads to a lower loan amount to apply for. In addition, paying a large down payment amount also improves your chances of getting a loan at lower interest rates. This is because it makes the lenders believe that you can easily afford the loan amount, and you pose the least risk to them. However, making high down payments does not mean that you will sacrifice savings of your financial goals or emergency funds. Consider having some money saved for emergencies.
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Now that you are familiar with the consideration before applying for specialty mortgage loans, make wise financial investments to generate greater revenues in the future!