Every home loan applicant should learn the basics regarding the home loan in bank especially regarding the rates. The fact is every has certain method and process in setting the interest rates on the applicant’s loans. Therefore, by learning on how the banks setting the rates, you as the applicant can figure out the amount of possible interest rate on your loan. Basically, how the bank determines the rates is started with the interest rate policy.
Setting the Interest Rate
In general, all banks are free to determine the amount of the interest rate for the loans and the deposits. However, they should consider the competition against other banks. In other words, they have to apply competitive interest rate for loans and deposits. They should consider that customers look for the lowest loan rate and highest deposit rate. In terms of home loan, the banks should follow the regulation set by the Federal Bank regarding the maximum amount of interest rate. In other words, banks are not allowed to set rates exceeding the maximum amount.
In terms of home loan, the percentage of the interest rate is varying on one bank to another. Therefore, it is normal when some banks apply lower rates than the rest of the banks. Meanwhile, the amount of the rate for every loan is different depending on certain different factors. For instance, the type of the home loan determines the amount of rate. And, the length of the loan and the value of the real estate also affect the final interest rate. What every applicant has to remember is there is a chance for negotiation regarding the interest rate and fees. Better qualification and credit history allows the applicant to get lower rates.
Requirements for Home Loan
To be able to get the bank home loan, it is necessary to have good credit history. This is an absolute requirement because conventional banks don’t want to deal with applicants with bad credit history. Therefore, it is important to maintain your credit score. Make sure it is not less than 650. When it comes to the loan’s term, it is actually varying from 5 to 30 years maximum. In the US alone, the most common home loan mortgage is given for 30 years of period. Usually, the longer the term, the higher the amount of interest rates and fees that the applicant has to pay for his/her home loan in bank.