Things to Look for Before Applying for a Home Loan

When we buy a home, we are already making an expensive investment in our future, and it takes away a large chunk of our monthly salary. Home loans enable you to buy a house with an inexpensive EMI payment.

When faced with all these scrutinies ahead of your application, it is always a good practice to use a housing loan eligibility calculator to have a fair idea.

• Eligibility

Lenders have certain eligibility conditions against which they offer a home loan interest rate. Factors including your salary and credit score play a significant part in determining if you are eligible for the loan or not.

• Maximum Availed Amount

All lenders use risk assessment tools and benchmark rates to pin a maximum amount you can avail for your property, so make sure you plan according to the same to have the lowest home loan interest rate. 

• Research and Compare

You should conduct thorough research regarding the rates of interest being levied by different lenders and compare them to know the lowest home loan interest rate in the market. 

• Hidden Costs and Charges

You need to ensure that you are paying only for the amount you owe upfront, therefore make sure that hidden costs or charges aren’t involved. Late payment, default payment, and pre-payment charges are some of the charges levied commonly, so make sure you know of these beforehand.

• Benefits Involved with the Home Loan

When a person takes a home loan, it not only instills a sense of accomplishment but also provides monetary benefits. One of the significant financial gains is in the form of tax benefits. One can claim a tax deduction on home loan interest payments of up to Rs 2 lakh per year.

• Monthly EMI

When applying for any loan, it is necessary to have a fair idea of the amount to be repaid in the form of EMI. Housing loan eligibility calculator is a tool you can use to calculate the same and check the bearable amount you can pay monthly with ease.

• Type of Rate of Interest

You can choose between two types of rates: fixed or floating rates. Fixed home loans allow you to schedule your reimbursement easily. Since floating rates differ under the market conditions, the interest rates on floating home loans may also increase in tandem with the EMIs.

If you can follow these basic guidelines, then you can buy your dream home using a low-interest home loan quickly.

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Normally, when the applicant wants to refinance student loans, they will also get to select between a fixed or variable rate loan. Many loan providers do not reveal the fees associated with the loan, this will be listed along with the terms and conditions on the loan documents. Be sure to carefully read through and look for other hidden charges.

Once you have selected a loan provider who offers student loan refinancing, an application form needs to be submitted. The lender will then conduct a hard search credit check to see if you fit the eligibility criteria, keep in mind that this can negatively impact your credit score as well. The documents that are required to be submitted along with the application form are listed below.

• The applicant’s proof of income.
• The applicant’s proof for citizenship.
• The applicant’s valid ID number.
• The applicant’s official federal and private student loan statements.

If you have a bad credit score, you can apply with a co-signer, however their information will be required (co-signer’s credit records, credit score and other documents).

What are the Advantages When Refinancing a Loan?

Lower Interest Rates

Most people that apply for refinancing do so, in order to lower their financing expenditure; this means that you need to refinance your existing loan with a new loan that has an interest rate which is lower than your current interest rate.
Now, with lower interest rates you can avail lower interest costs which will result in you making a significant improvement in your overall savings over the loan term, specifically if it is a long term loan.

Change the Payback Period of the Loan

You are allowed to extend your repayment cycle in order to increase the loan term but keep in mind, this may result in you paying more in interest costs. The same can be done when it comes to refinancing a short term loan.
For example, let’s say that you have an existing loan that spans for 30 years. You can refinance this loan into a 15 year period instead, this will come with a higher monthly loan repayment amount but it will have a lower interest rate.

Lower the Monthly Loan Repayments

Remember that just because you apply for the refinancing of your student loan, it does not mean that there will be a drastic change. The new loan balance is more likely to be lesser than your previous loan balance as you will now have lower interest rates or a longer loan term.

What are the Disadvantages When Refinancing a Loan?

Higher Interest Costs

In certain cases, the refinancing process can misfire, let’s say that you manage to stretch your loan repayments for an extended time, you will end up paying higher interest costs towards your debt. However, you will still be satisfied with your lower monthly loan repayment amount but because of this, the higher lifetime cost of the refinanced loan will be offset.

Transaction Surcharge

Depending on which loan provider you select and which state you reside in, refinancing student loans can be expensive. The average outstanding principal rate is from 3% to 6% of the refinancing fees.
These additional charges generally include the origination fee, appraisal fee, application fee, inspection fee and the closing costs. When it comes to refinancing other types of loan such as a home loan, the closing cost can go upto thousands of dollars.

Benefits will be Lost

When applying for the student loan refinancing process, you will lose certain benefits that could prove to be useful. It is a well known fact that federal student loans are more flexible than private student loans. If you hold a public service job and have a federal loan, you may be able to get your loan partially forgiven.

What is the Public Service Loan Forgiveness Program?

The Public Service Loan Forgiveness (PSLF) program is a federal program that is implemented specifically for students who are facing financial difficulties in clearing their student loan. This program also encourages students to enter into careers such as nursing, teaching, government administration, military and other public interest jobs.

The individual will need to make at least 10 years worth of loan repayments while they are employed under the government, nonprofit organization or any public service job in order to qualify for the public service loan forgiveness program.

Many times, students refinancing applications get declined as they fail to meet the requirements of PSLF. To ensure that you are successful in availing this program, meet the following conditions.

• Ensure that you have the correct type of loans.
• Ensure that you make around 10 years worth of loan repayments.
• Consider working full time for an employer.
• Consider switching to an income-driven repayment plan.

In case You Do Not Qualify for the PSLF Program

Due to the PSLF strict requirements, it is understandable if you fail to qualify. Even though the public service loan forgiveness program is quite popular, it is not the only one, you can search for other programs based on which state you reside in. There are 46 states that offer their own loan forgiveness programs.

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