Everybody desires a home, but you would have to save for years to own one or secure a mortgage and pay it off in a couple of years. Thanks to home loans, you can have the house of your dreams. However, you have to be well-informed to avoid making mistakes which could change the entire process into a nightmare. Here are the seven common mistakes you should avoid when applying for a home loan.
1. Applying For A Bigger Loan That You Can’t Repay
When financing a home or planning to take another mortgage, consider what you earn. Your EMI outflow should be between 30 and 40 percent of your income. If you take a loan higher than your EMI, you will be screwing yourself up big time. Don’t try it even if you expect a salary increment in a few months.
What if the increment is lower than you expected? Or what if there are additional expenses which you never planned for? There are no shortcuts in this situation. So, consider your financial health before you borrow.
2. Not Knowing How Much You Can Afford For A House
If you don’t know how much you can spend for a house, you might be wasting your time. You will likely visit houses which you can’t afford or homes that are below the price figure. Most first-time buyers aim to buy a house and secure a home loan with monthly payments. That’s not the right approach. Find out the price range using a mortgage affordability calculator and figure out whether a house is worth it.
3. Getting Too Emotional
It’s normal to fall in love with a beautiful home, but don’t let the emotion take control of you. You may be a veteran, and your dream was to have that wonderful home, and it’s there before your eyes. Take it slow!
Ask yourself if the house is right for you. Is it big enough? Is the neighborhood convenient? Will you be forced to do renovations? That way, you will know whether you need the home. By the way, if you have served in the military for long, there are home loans for veterans like you.
4. Not Buying A Life Insurance Policy
While acquiring a home loan, it’s important to buy health insurance or life insurance policy. In case anything happens, and you require urgent medical attention, you will not have to worry about paying the medical bills. If you kick the bucket, and your family is left behind, they will not be bothered by expenses since the life policy will take care of them. So, before taking that home loan, insure yourself.
5. Taking A Loan For A Short Tenure
Banks usually provide home loans that should be fully repaid in 30 years, but it depends on the eligibility of the borrower. If you take such a home loan and repay after ten years, there will be no penalty. But if you do the vice versa, take a 10-year repayment loan, and fail to repay within that time, you will be slapped with some penalties.
6. Forgetting To Check Credit Reports And Correcting Errors
Mortgage lenders will first check your credit reports before deciding whether they should approve your loan and what interest rate they should set. If your credit report is not error-free, they might quote a higher interest rate. Make sure that your credit report is excellent. Request a free credit report from the credit bureaus.
7. Not Getting A Home Inspection
Without a home inspection, you might buy a house that will mint you more money on repairs. A home inspector will let you know whether the house is perfect for moving in. A home inspection is not much costly compared to what it would cost you to repair an entire house.
Buying a home is a big achievement, but imagine how terrible it would be to secure a home loan that screws you up! Avoid the mistakes mentioned above!
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