As buying a home turns out to be an increasingly expensive investment, it is becoming a prevalent practice to approach banks and financial institutions for home loans. Since the interest rates are going down, housing loans are becoming more affordable. The facility of applying online has quickened the process of sanctions and disbursement. Nevertheless, banks and financers only approve home loans after they have done a thorough check of the credit history and lending capacity of the borrower.
Whenever one plans to take a home loan, there are some important points that one needs to consider.
Here are some important points to consider, before applying for a home loan:
- Legitimacy of the property
In advance of acquiring a real estate property, one has to ensure whether the builder is genuine and all the documentation related to the property is proper. In the wake of RERA being operational throughout the country, the builder’s profile can easily be validated at any time on the RERA portal. Generally, banks do not approve home loans if the builder’s credentials are not in its approval register.
- Provisions for advance payment
It is a must to outline a budget prior to beginning a house hunt. Work out the down payment that is a prerequisite for the venture. It is normally around 20% of the worth of the property. One can go ahead and pay more if affordability permits.
It is inevitable to save in advance for down payments. In case, funds are insufficient for the down payment, taking a soft loan from your employer, family and friends is a good option. Efforts should be made to reduce the amount that is to be loaned amount so as to trim the interest outflow.
- Examine your eligibility benchmark
Banks and financial institutions have an itemized eligibility checklist that is used to decide whether you are entitled to a loan or not. Banks specifically scrutinize your credit record to get to know your repayment practices and are inclined towards a credit rating of 750 for sanctioning a loan. Age factor, earnings, line of work, parallel security, bordering prerequisites among others are also crucial considerations at the time of fixing interest on the loan.
- Loan comes along with attached fees and charges
Home loans are accompanied with affiliated fees and charges. Processing fee is the most widely associated fee charged when applying for a loan. Check if these charges are rational at the time of selecting a lender.
- Examine the rate of interest
The rate of interest on loans is a deciding element in determining the lending bank or institution. Lesser the rate, lower would be the EMI expenditure. Home loans are provided at fixed at flat and floating interest rates. Whereas, fixed interest rates are the same for the entire duration of the loan, floating rates are subject to changes with bank’s changing credit practices. Evaluate your choices before finalizing on a loan.
- Weigh your paying capacity of EMIs
It is a common scenario for home buyers to take on excess strain at the time of paying EMI. They tend to feel that things would streamline with time, as they are optimistic of better earnings with time. Contemplate the possibility of not getting a timely increment or save for a rainy day or unanticipated circumstances. An ideal loan to income ratio would be of 20% to 30%. It is a smart more to alter the tenure or raise the EMI installment according to your affordability.
- Have an insurance plan to provide backend support to the loan
As you take a loan, the outstanding balance debt is borne by your family, in case you are not around. This financial burden on your family can be averted if you have a mortgage recovery insurance shield at the time of taking a home loan. It is a reducing-term plan in which, the cover sum lessens as you repay the loan.
- Research always helps
There are a lot many banks and financial institutions that offer home loans at competitive rates of interest. Ahead of taking a home loan, online research is much recommended, followed by comparison of interest rates and processing fees of all home loans in the offering. Matching helps you pick a loan that comes with a most credible interest rate in addition to limited fees and levies.