Monday, October 15, 2012

The Chicken Or Egg Approach To Acquiring A Home Loan

People often need to know what happens first - do you first search around until you find your dream home and then obtain a home loan, or do you first obtain a home loan and then start to look around?

For me personally it might make sense to first obtain a home loan to see just how much I actually qualify for, before starting with the big house hunt. It would make no sense falling deeply in love with the most amazing, perfect house ever. and then be told that I only qualify for a 3rd of the loan amount!

Nonetheless, in order to actually apply for home loans, a bank or other loan company would require seeing an offer to buy. This document is confirmation that you are really thinking about buying the house for which you want to get a home loan for.

When you think about the above, it is really a catch 22 situation. You can't set your heart on a property unless you find out what the size of your awarded home loan would be, but you cannot determine what your actual home loan amount will be without selecting the house first. It is really a case of which was first - the chicken or the egg?

The good news is, you'll be able to at least get a basic idea of the home loan amount you qualify for. There are many home loans calculators available on the internet which can assist you with a basic calculation. You only have to enter your total income monthly, the interest rate presently and the period you want to pay the loan off over, and you will be provided with 2 figures: The maximum amount you qualify for and your monthly bond repayment should you decide to obtain the maximum loan.

This is however no guarantee that you will be awarded the home loan. A home loan application is quite a lengthy process and everything from your monthly expenses to your financial history and criminal records get looked into in the finest detail.

Some financial institutions offer the option of pre-approval for home loans. They will basically complete the whole home loan application with you, and once you are approved for a certain amount you have a specific time period in which to find and purchase a house.

As with all other things that cost a lot of money, it is very important do proper research beforehand. Not all lenders will offer you the same rate of interest for example. Some will suggest a set interest rate and others a variable interest rate. Other companies might offer you a payment holiday (where you don't have to pay for a number of months in case of unexpected circumstances), other institutions will frown at the idea.

The most important thing is to go with a well-established house loan company to assist you with this exciting purchase. Speak to friends and family and get several referrals before making your decision. Buying a house is a huge accountability - make sure that you are properly prepared!

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