5 Rules You Should Consider Before Applying for Home Loan
1. Understand your preferences
Before applying for a home loan, you should review your financial situation and be aware of what kind of loan you are applying for, the terms you can reasonably afford, preferably 30-40% of your salary, and most importantly whether or not you have fallen behind on other mortgage payments. This is because many financial institutions can be very strict with their borrowers' credit, especially those with low credit score or mark as blacklisted before they make any loan approval. This can be done by validating borrowers' credit information via National Credit Bureau(credit status check service).
Self-employed borrowers should establish a good financial creditability by having significant cash reserves
in their saving account for at least a period of 6 months. Nevertheless, this principle should also be applied to full time employees as well. Borrowers can also check online for loan packages with different financial institutions and see for themselves whether or not they have the power to pay back their installment loan and be more aware of their creditability.
2. Do your Research
Do some research on types of financing available and determine which is best for your financial situation when buying a home. In Thailand, residential loan are usually offered by three major groups as follows:
1. Government Financial Institutions, like Government Housing Bank (GHB), Kruthai Bank (KTB), and Government Saving Bank(GSB).
2. Banks and Financial Institutions.
3. Insurance Companies That Provide Loans for Housing.
Do note that government financial institutions are usually more trustworthy and safer than most private sectors, plus the interest rate is roughly lower. So, as far as money is concerned, they would probably be the best choice. Private banks and financial institutions on the other hand face a higher level of competitions, thus they usually offer a wider range of loan packages and a premium processing services in which loan get approved instantly or make possible in a very short period of time. If you are looking for a quick and easy, hassle-free loan, then they would probably be your best bet.
As for insurance companies, although they offer similar home loan services like government financial institutions and private banks/ financial institutions do, they usually have limited or strict terms and conditions regarding their loan services such that borrowers are only given 5,000,000baht or no more than 85% of the property's appraisal values per loan. They lack flexibility when compared with the first two groups, however, it is up to you to decide which financial institution that best fits your needs.
3. Terms and Conditions Review
Terms and conditions for loan are vary between different financial institutions, example are shown in their interest rates, some offer a fixed rate while others may offer a floating rate. A fixed interest rate will not change throughout the duration of loan and isn't affected by market fluctuations, while a floating interest rate will go up or down as interest rates in the wider market change. Fluctuations in interest rate could adversely affect your abilities to pay back your mortgage and you may waste more money than needed. They are best suited during period of lower interest rates which could help increase your disposable income as your interest payments may be lower.
Finally, it is up to the borrower to decide what suits them best. Before taking a decision, it is advisable for the borrower to compare home loans from different institutions in detail, including the various parameters set forth.
4. Preparing Your Documents
When applying for a home loan, you need to keep in mind some general conditions pertaining to determination of eligibility and the documentation requirements, in order to expedite the loan process. The specific requirements may vary between different banks, depending on the purpose of the loan. However, the following documents are always needed for any home loan: personal documents, financial documents and collateral documents.
• Copy of ID card / Official ID card of borrowers.
• Copy of house registration of borrowers.
• Copy of name / surname change Letter (if any).
• Copy of marriage/divorce/death certification (if any).
• Current home address / workplace address.
• Copy of loan contract / mortgage / statement / past 12 months installment payments receipt.
A. Full-Time employees / Government Officers, State Enterprise Officers, and Regular Employees
• Salary slip/salary certification letter.
• Copy of bank statement / income tax payment certificate.
• Proof of income documents (if any).
B. Self-Employed Persons
• Copy of business registration certificates / certificate of Incorporation.
• VAT registration certificate / income tax payment certificate.
• Past 6 months saving bank statement (savings account/ current account/ fixed deposit account).
• Any collateral documents such as title deed, certificate of utilization ; N S 3 K document with all registration index pages (2 copies required for registraton index).
C. Discharge of Mortgage and Reimbursement:
• Brief record of borrower's assets for collateral.
*It's wise to create a review or a checklist of the appropriate documentation needed for loan application, for this will get your loan approved much faster and smoother. Further, please be reminded that an incomplete applications can be the cause of loan denial.
5. Choose Your Financial Institutions
It is recommended that you apply for a home loan with multiple financial institutions (at least 2-3), so in case of loan denial you would still have some alternatives left. Moreover, be advised that some financial institutions may charge for additional services such as home appraisal or any related services, please check with them thoroughly.
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