Buying a home is a goal most people share. The fact that you do not have to keep paying rent means that this investment might lift a huge financial burden off your shoulders. Investments of this magnitude, however, do not come easy. Therefore, you need to brace yourself for some serious house hunting. And of more importance is to work with your budget and your ability to raise funds. Most people opt to get loans from banks.
Different lenders offer different loan rates. Some will give you better options, while others might fall short of your expectations. But overall, most banks use some metrics to formulate a loan plan and rates. These parameters are often used to determine the element of risk. If you manage to convince the lender that you are a low-risk investment, then you stand a high chance of getting a favorable repayment plan. That said, here are some key factors that could help you lower your loan rates.
Health Credit Score
A good credit rating is essential to be qualified for a home loan by a lender. It is the first thing that a lender looks at before considering your application. A good score will see you get a low interest rate. Otherwise, you should be prepared for higher rates, and at times, they might even turn down your application altogether.
Lenders also look at things such as your income stability. This explains why salaried people always have a higher chance of getting a loan that those who are self-employed. If you are self-employed, you need to provide the lender with lots of documentation, such as your past income tax returns.
Type of Interest
Banks often provide loans in two different interest rates – fixed rate and floating rate. The lender often sets the fixed-rate while an authorized link sets the floating rate. In most instances, floating rates are often associated with better terms than fixed-rate loans.
Location of the Property
The location of a property has a direct influence on the rate you pay. For instance, the loan given while buying a property in a busy metropolis is undoubtedly better than what you might have if you wanted a home in an isolated area. So it is advisable to buy a house in an appealing location to be qualified for friendly terms.
Mortgage loans are subject to the laws of demand and supply. As such, it is imperative to do due diligence when looking for a loan, and most importantly, consider your financial health.