What To Look Out When Looking For A Loan

When in doubt, listen to your father. And this is all the more true when you are thinking of applying for a loan for your house. There are sundry issues related to loans and it is imperative that you get them right, right away. For it is your dreams and aspirations at stake and it is you who will have to pay back the money to your lender.

Things To Settle Before You Actually Apply For The Loan

There are certain things that you should definitely consider and do before you actually sign up for a loan. The first and foremost thing is that you should go through the various loan schemes offered by the banks, compare the interest rates on them and then only decide on what suits you best. There are many lenders who offer quite attractive loan deals and you can only get to know about these if you indulge in a bit of window shopping for loans.

When you are considering the pros and cons of the various loans and calculating the associated costs, it is important that you keep in mind that the cost of the house will also include the stamp duty, mortgage insurance, registration costs, loan application and valuation fees. Individually they may not amount to much, but collectively they will build up to quite a considerable sum.

And talking about the costs involved in your mortgage loan, one point is worth remembering. Most of the lenders these days ask you to create an escrow account that will contain the money to cover for a few months of tax and insurance payments. You will also be required to provide for the insurance policy for the initial year. These are also the costs that you need to consider while you calculate the total costs involved with the loan.

When you are sifting through the various loans, make sure that you are not swayed by the attractive terms and conditions. There are lenders who tend to couch the disagreeable facets of their loan schemes in glitzy words hoping that the unknowing borrower would fall for it. If you think something to be dubious or think that you do not understand a particular clause, definitely seek the advice of a financial advisor.

And in this context, your well-wishers will advise you to be wary of the "honeymoon" rates offered by the banks. This very alluring scheme consists of very low interest rates right at the outset of the payment period, only to be followed by the conventional bank rate after say six months or a year.

Before you actually commit to any lender, be absolutely sure about the minimum costs involved in the loan amount, the grace period and of course, the closing costs so that you do not come in for a rude shock later on. Prod and probe your lender for all the details regarding the loan and feel free to ask any other borrower for advice.

Some Terms To Know Before You Go In For A Loan

Usually lenders are quite willing to dole out the money to you and would really try their utmost to have the loan customized to your needs. But still you need to be aware that there are unscrupulous creditors who are always looking for ways and means to take you for a ride and rob the riches from you. Therefore it is very important that you understand the loan terms and definitions absolutely (read between the lines too) and form a clear idea of what is actually in store for you. Some of the typical loan jargon that you should know are:

Loan Term: This refers to the total repayment period of the loan. This may range from 10 to 30 years, but you should remember that a longer repayment period means both a less amount to be paid monthly but more in terms of the interest.
Interest Rate: There are two kinds of interest rates applicable to loans: fixed and adjustable. The former entails that you will pay at the same interest rate throughout the whole of your repayment period, come what may (that is, whatever be the state of inflation). On the other hand, with an adjustable rate mortgage loan the interest that you need to pay change at times in relation to various parameters like the prevalent interest rate.
Closing Costs: Closing costs are not that easy to calculate, for not only lenders, but also closing agents, state laws and also attorneys bear upon these costs. So it is always advisable to approach a lender who charges the lowest junk fees or someone who will cover your closing costs from his revenues.

Go forward with your loan process but with caution and obviously armed with all the details about the scheme. Information is power and with a loan at stake you just cannot afford to be slack.----------------------------------------------------------------------------------
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