Finding the right loan for your self

How do I choose the best loan – program for me?
Your personal situation and or need will determine the best kind of loan for you. By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best. It is important that you borrow money for a specific purpose and use that money for that purpose.

Diversion of funds received from the bank to be used for other purposes can be disastrous.

  • Do you expect your finances to change over the next few years?
  • Are you planning to live in this home for a long period of time?
  • Are you comfortable with the idea of a changing mortgage payment amount?
  • Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

Your lender can help you use your answers to questions such as these to decide which loan best fits your needs.

What is the best way to compare loan terms between lending financial institutions?
First, devise a checklist for the information from each lending institution. You should include the company’s name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.

Speak with companies by phone or in person. Be sure to call every lender on the list the same day, as interest rates can fluctuate daily. In addition to doing your own research, your real estate agent may have access to a database of lender and mortgage options. Though your agent may primarily be affiliated with a particular lending institution, he or she may also be able to suggest a variety of different lender options to you.

Are there any costs or fees associated with the loan origination process?
Yes. When you turn in your application, you’ll be required to pay a loan application fee to cover the costs of underwriting the loan. This fee pays for the home appraisal, a copy of your credit report, and any additional charges that may be necessary.

The application fee is generally non-refundable. It is the responsibility of the financial institution you are borrowing from to inform you of any charges that may be applied to your loan. The customer may also ask for the likely charges at the start of the borrowing process.

Are there procedures for real estate settlement in Uganda?
The land act, laws of Uganda provide procedures for land acquisition, ownership and disposal. In case of any disagreements, you may settle them through arbitration (if the clause on arbitration was included in the contract to buy or sell land) or through courts of law. Any disputes over land ownership should be reported to the Ministry of Lands, office of the Registrar so as to take such procedures to ensure ownership is protected as matters are under dispute.

What is a good faith estimate, and how does it help me?
It’s an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. The lender must supply it within three days of your application so that you can make accurate judgments when shopping for a loan.

Before you buy land, what should you consider?
Financial Institutions are not allowed to discriminate in any way against potential borrowers. If you believe a lender is refusing to provide his or her services to you on the basis of race, color, nationality, religion, sex, familial status, or disability, contact Uganda Bankers Association, located on Plot 10, Buganda Road; phone +256 414 343 199.

In Uganda, you must be careful before you sign any contract as there is no office of fair housing or consumer protection in such issues. You must ensure that you cross check at the Lands Registry to ensure that the land title is genuine before you buy a home as cases of land fraud has been reported to be on the rise.

What responsibilities do I have during the lending process?
To ensure you won’t fall victim to loan fraud, be sure to follow all of these steps as you apply for a loan:

  • Be sure to read and understand everything before you sign.
  • Refuse to sign any blank documents.
  • Do not buy property for someone else.
  • Do not overstate your income.
  • Do not overstate how long you have been employed.
  • Do not overstate your assets.
  • Accurately report your debts.
  • Do not change your income tax returns for any reason. Tell the whole truth about gifts. Do not list fake co-borrowers on your loan application.
  • Be truthful about your credit problems, past and present.
  • Be honest about your intention to occupy the house
  • Do not provide false supporting documents.

What happens after I have applied for a loan?
It usually takes a bank between 1-6 weeks to complete the evaluation of your application. Some banks may take a shorter period to process your loan application. It is not unusual for the bank to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the bank will call you to let you know the outcome of your application.

If the loan is approved, a closing date is set up and the bank will review the closing with you. And after closing, you’ll be able to move into your new home.

What should I look out for during the final walk-through?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.
It is advisable to have a friend who is qualified engineer to check the home to ensure it conforms to housing standards and is safe for living.

What makes up closing cost?
There may be closing cost customary or unique to a certain locality, but closing costs are usually made up of the following:

  • Attorney’s or escrow fees (Yours and your lender’s if applicable)
  • Property taxes (to cover tax period to date)
  • Interest (paid from date of closing to 30 days before first monthly payment)
  • Loan Origination fee (covers lenders administrative cost)
  • Recording fees
  • Survey fee
  • First premium of mortgage Insurance (if applicable)
  • Title Insurance (yours and lender’s)
  • Loan discount points
  • First payment to escrow account for future real estate taxes and insurance
  • Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable)
  • Any documentation preparation fees

What can I expect to happen on closing day?
You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You’ll pay the lender’s agent all closing costs and, in turn, he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

What do I get at closing or end of loan?

  • Settlement Statement is filled detailing costs and benefits associated with the transaction.
  • Mortgage Note
  • Mortgage or Deed of Trust
  • Binding Sales Contract (prepared by the seller; your lawyer should review it)
  • Keys to your new home