Everyone dreams of being the owner of a house, people work hard all their lives to save enough money so that they can afford a house. A house is of immense importance to us and so people started regarding house ownership as the ‘dream of the free world’ or the ‘Great American Dream’. However, houses do cost a lot and so not everyone can afford to buy them only by depending on their monthly incomes. Thus, the best alternative is to opt for house finance.
What is House finance?
It is the broad term that can be used to describe various lending and borrowing options, for the purpose of buying or constructing a house, like mortgages, home loans etc. It is a huge industry that generates billions of dollars in revenue per year. Lending option for constructing a house is available in almost all the countries, even in rapidly developing economies like Brazil, India and Russia this concept of borrowing capital has become very popular among the working professionals.
Banks: they are the most traditional lenders of home loans and they still continue this practice. In most countries the public sector banks, in which the government has a stake, offer these loans at a very subsidized rate for the betterment of the people.
Mortgage companies: they specialize in home loans and thus offer a reduced loan processing time. However, they do have strict eligibility criteria and offer a higher interest rate on all loans.
Private Lenders: there are many private institutions who lend money for housing purposes. They mostly do it on a regional level but we also have big players who indulge in this business of lending across the country. They often ask for a substantial collateral security for the loan and offer the highest rate of lending.
Main Eligibility Criteria:
Credit history: it is the most important criteria to get a home loan; with a low credit score it would be impossible for anyone to get a loan, even if a person somehow manages to get it with a low credit score, then the interest rate offered will be too high. The ideal credit score in the US is above 600 to get a loan with a low-interest rate on any house finance.
Monthly Income: it is important that the monthly income of the person who applies for a loan is sufficient to pay off the monthly installments of the loan. So, do keep in mind that your salary will determine the amount of money that can be approved.