It is important to keep your interest cost towards a home loan to a minimum by qualifying for the best interest rates. You would have to take certain steps related financial discipline to ensure you get the best bargain from the lender but do not forget to shop around for your home loan. Do not opt for the convenient route of applying for a home loan in the same bank wherein you have an account. Just go around and compare the price of the home loan which is the interest rate charged to you. Consider it just like any other shopping you do and look around to get the best deal. There are a few simple and easy to implement steps that would go along way in helping you get the best interest rates.
Work in improving your credit score: Your exercise towards improving your credit score should start the day you start looking out for a home. Your credit score reported by the three credit rating agencies is the single and largest contributor of the interest rate that the lending institute is going to charge you.
Review your credit score: Make sure that no errors or discrepancies observed in your credit score. In case you find any errors, please report the same to the credit bureau and get the same rectified. The FCRA act makes it mandatory for the three credit rating agencies to make sure that the consumer credit reports provided by them to the lending institute are free from mistakes or discrepancies.
Adhere to payment timelines against the loan: All the loan outstanding in you name should be serviced and paid in time. This increases your credibility and indicates your capacity to repay. Not only you should make sure that you do not apply for any new loans, if possible go ahead and prepay any outstanding debt that you carry prior to applying for a home loan. Any loan outstanding would not only reduce the amount of loan that is available to you but also pushes your interest rate higher.
Pay off Credit Card bills in time: Make sure you do not revolve the credit card outstanding. A revolving credit simply suggests to the lending institute your inability to pay from your monthly salary and your credit rating goes down and the interest rate charged to you increases. Pay all your credit card dues in time. Make sure that you do not make an application for a new credit card.
Avoid Big Ticket Purchases: As the date of applying for a home loan draws near, make sure you do not get any high value transactions on your card. The outstanding amount on your card should preferably be less than half of your available credit limit.
Ensuring financial discipline is the key to qualifying as a prime customer who enjoys the best interest rates on his loan. The lending community places a great emphasis on a good quality credit report. It is for you to make sure that your credit report gives a true and fair picture of your credit worthiness and does not misrepresent facts which would lower your credit score.
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