Property is an asset and every individual wish to purchase a house at some point in his or her life. A property helps you reap numerous financial benefits. However, with the increasing price in property buying a dream house gets delayed for many. The banking sector, NBFCs provide home loan opportunities that are lucrative and beneficial. If you fall short on cash, or are not in support of liquidating your savings; you may choose to avail a Home Loan. .
A home loan is a great form of financial assistance. The banks, home finance companies help make your dream of purchasing a home a reality. A streamlined process, proper documentation helps you in getting the loan. The lenders give you easy monthly instalments option to repay the loan within a set tenure. Planning to apply? Here are some important suggestions that could help. Hey! Ease the application process and make loan repayment simpler. .
Home Loan: Top 9 Tips to Consider Before Applying
1. Stability of job and income
Home loan is generally a 15- 20- or 30-year commitment. Hence, the most important factor for the lenders is to consider your job. Most importantly, your income stability is taken into consideration. Lenders consider your net salary, your expenses, and your existing EMI (if any), to compute your fresh loan eligibility. They consider 55-60% of your monthly income as the permissible amount for overall loan repayments. Given that a home loan is a long-term liability; the lender measures your ability to maintain this income long-term. Consider your employment and income stability before you decide to go for it. .
2. Research on Loan Options
With the internet it is now a matter of few mouse clicks to access information on anything. Spend time to do an extensive research on the home loan options available in the market. This is exceedingly important before applying for a loan. Your research should also include three fundamental factors that formulate a loan. Firstly, down payment, EMIs, and repayment tenure. A proper research on these three factors before your go ahead with the application helps you to pick the best. Subsequently, you can select a suitable home loan from a better lender at lucrative interest rates. Explore all the details and uncover every nitty-gritty that can affect your home loan application. .
3. Home Loan Interest rates, fees, and charges
Once you finalise to go for a loan the first thing that will pop up in your mind is the interest rate. There are generally two options available: Fixed rate and Floating rate/ Adjustable Rate Home Loan (ARHL). The fixed rate is one that is not affected by market rise and fall, while floating rate changes as a result of market fluctuation. It is essential to keep in mind that the fixed rate is slightly higher than the floating rate. However, it is important to assess the pros and cons in both cases. There are various other fees and charges that are associated with the loan-taking process. To mention a few; processing fees, verification charges, switch fees, penalty on late payment, service tax and so on. .
4. Check your credit score
Your CIBIL report (credit scoring) plays a significant role in your loan sanction. A high credit score signifies that the customer can service the loan easily. These bureaus quantify your credit score on a scale of 300 to 900. They measure it on the basis of your loan repayments, credit card usage, previous loan or credit card applications and the like. It is important that your credit score should be more than 700 to perk up your chances of getting a home loan. .
5. Choose Suitable EMIs
As you avail a housing loan the major concern is definitely your EMI (equated monthly instalment). However, Banks and NBFCs offer varied EMI options to suit different needs of the borrowers. The monthly instalment at times depends on the down payment you agree to at the time of making the purchase. It is an amount that you need to shell out every month. Therefore, ensure that you choose the amount sensibly.
6. Understand Foreclosure Norms
Repaying the outstanding amount ahead of schedule i.e. foreclosing it saves you from paying any added costs. The earlier your loan is paid for, the higher is your credit score. RBI often revises instructions on foreclosure norms. .
7. Home Loan Eligibility Check
How much you are eligible for is of utmost importance. It is important to confirm your eligibility before applying for a home loan. Your age, income, city of residence, credit history, employment stability, liabilities establish your eligibility. There are Home Loan Eligibility calculators available online. You may check before you approach a lender. .
8. Home Loan Additional Charges
Besides the EMIs, there are other expenses too. To mention a few administrative processing or service charges, switch fees etc that banks impose upon borrowers at the time of loan application. Don’t fail to spot these at the time of the loan application. Confirm if these are one-time charges, or they have any monthly charges as well. It is important to have a clear understanding of all the expenses and plan finances accordingly. .
9. Read the Documents Carefully
It is important that you read the agreement (documentation) methodically. This will give you a comprehensive knowledge of the loan application. .
To sum up
Short of information regarding the home loan process is the most important reason why most people shy away from taking any loans or end up with wrong financial planning. Hope the above points help you make a calculated choice regarding home loan. .
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