And people thought that the myth were only related to history. There are umpteen on financial front. While one may think that a home loan may be a simple product, which indeed it is, but still there are misconceptions that surround it and these get shattered only when one goes through the process of applying one for himself. So if you want a seamless process of loan application and do not want to either get stranded or run losses, then check the following 5 common understanding gaps. An clarity on these will help securing a speedy loan and it will be a better deal on monetary front as well.
Than all properties will get funded
This is the biggest myth among the home buyers. Please be mindful that all properties do not get funded. This may be result of the area where the property is located and or the type of property one is trying to purchase. There may be a situation where the title of the property is not clear and the bank may refuse loan on it despite it qualifying on other parameters.
However, it does not mean that all housing finance companies have a common criteria. Thus, it may just be prudent to check with another few companies before arriving at a decision that the loan can be granted for buying a specific building, apartment or land.
That interest rates cannot be negotiated
This is another myth that results in people picking up a higher priced borrowing. Since home loan is a long term commitment, such borrowers will be left with little option but to live with higher home loan interest rate. The banks need good borrowers as much as you want the loan. But, on account of emotional angle attached to buying the house and the ignorance, most people do not negotiate or even if they do, are unable to get any benefit for the half hearted efforts. The rates are negotiable just like any other product that you may be buying. One needs to keep in mind that since the loan is large, even as small as a 0.10% reduction can lead to huge savings.
That banks want borrower to keep shorter term of loan
Contrary to this misconception, a longer term loan will fetch the banks a higher earning. It is up to the borrower to decide the term. But this has to be in accordance with the money that one makes. A shorter term can while assist in faster run off and lower cost of funds, a longer term will ensure availability of adequate funds to meet the expenses and exigencies. So one has to strike a balance and decide the term that does not put much pressure on meeting running expenses.
That loan with lowest rate is the best
Completely false. One also has to factor the other costs into account while arriving at the decision. Ideally one should look at the annual percentage rate. This takes into account all costs and not just the interest rate. One may find that the APR of a loan with a higher interest rate is lower than the one being offered at a lower interest. So while checking with the bank, as for APR.
That high credit score is ticket to approval
There is no doubt that credit scores play a vital role in the underwriting process and can be the reason for rejection of the request. But please be mindful that a high score cannot be the ticket to loan approval. There are times when despite some stress on past repayments, the person may have a high score. Also, there are other considerations like the income, loan amount to the value of property that can be the deciding factors. In fact, even the employer profile plays a role in the process of evaluation. On the other hand a person with slightly low CIBIL score may be able to secure the loan and have the joy of living in own house.
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