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Lender selection

By ResidenceBuy India  |  0 comments   |  2031 views  |   Feb 15 2012

  • Key providers: It is useful to create a shortlist of lenders, and start with the nationally recognized ones. This gives you an array of choices to select from.
  • Understand the total package: Mortgage products are complicated with myriad combinations of loan terms, down payment, points, and interest rate. See our "Product Selection" section to know more about mortgage products. While deciding, understand what the product implies for EMI, total interest cost, and future payment increases. Again, don't be swayed by teaser rates with low initial EMI that explodes after few years. Our MORTGAGE TOOLS are a good place to start to compare across products and decide what is best for you.
  • Previous banking experience: If you already have banking experience with any key mortgage lender and you are a happy client then it is worthwhile to give them first consideration. You may already know people there and the additional trust factor makes sure that you have one less thing to worry about.
  • Lender's Reputation: The reputation of the lender is especially important for a complex product like mortgage. The legal and procedural complication implies that often the borrower is less informed than the lender. In some situations the lenders take advantage of this by predatory lending. So to be safe it is essential that you only consider reputed lenders.
  • Trust & reference: Talk to your friends and family about their experience with different lenders. You don't have to make the same mistakes they committed. Moreover, often personal references is not driven by any commercial intention, thus a good reference is extremely valuable.
  • Special relationship between seller and lenders: Some builders have special relationship with specific lender, thus you may receive some concession while dealing with them. While you are not obliged to finally settle with them, we advise you to explore this option. Many large builders get their projects "pre-approved" by specific lender. First the lender examines builder and project attributes (title of that project, the stage of construction, and builder's track record in timely completion). Upon successful review, the lender declares all properties in the project to be "pre-approved". This saves you from legal and technical checks.
  • Collateral requirement: Usually the property you purchase becomes the security for the lender. However often other collaterals like fixed deposit or saving deposits may be used.
  • Bundled Product: Often lenders tie up with insurers to provide special discounts on home insurance. It is useful to explore this option if you are contemplating taking the home insurance.
  • Credit line offer: Buying a home is an expensive affair and it affects short term liquidity significantly. If a home loan comes with an additional credit line at a promotional rate then so much the better. It can take care of the home furnishing without further straining your depleted liquidity.
  • Time till closing: Time till closing varies from lender to lender and from property to property. To expedite the process make sure that all the required documents are submitted. Sometimes the lender also requires information about the property from independent parties, and this may also delay the closing of the loans. We suggest you get an approximate closing time from the lender right from the start.
  • Possibility of delay in approval: Delay in approval may happen due to several reasons. Make sure that your documentation is complete so that you are not responsible for the delay. Contact your lender to find out the reason for delay and take necessary steps to expedite process. Also understand that some factors may be out of your control. In that case have patience.
  • See RBI guidelines: While different lending institutions have different rules, there is a set of general guidelines set down for lenders. Go through it carefully and make sure that the lender you choose abides by all these guidelines. See http://www.rbi.org.in/scripts/FAQView.aspx?Id=77


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