Want to Buy Your Dream Home? Checklist these Points before Opting for a Home Loan

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Home Loan

A home loan is a long-term commitment, necessitating strict judiciousness on an applicant’s part.

Besides ensuring to meet the set eligibility criteria, you must also ascertain the real estate property you are aiming to buy will fetch you the necessary funding. This makes it crucial for homebuyers to check the property location before applying for a home loan

Also, you need to be updated with the formalities that surround home loan approval. Above all, the applicant is required to conduct proper market analyses of different institutions that provide home loans. Check their formalities, requirements, and inspection process to ensure instant approval. 

You shall also check the benefits and features such institutions provide with a home loan before applying for one. 

What are the aspects to consider when applying for a home loan? 

Listed here are the various aspects that a home loan applicant must consider beforehand to make sure a smooth application and approval process follows. 

  • Credit score

Any home loan applicant is required to consider their credit score, which needs to be above 750. The credit or CIBIL score is one of the most crucial home loan eligibility criteria and indicates an applicant’s creditworthiness. It proves their soundness concerning managing debts. 

Ensuring that you meet your dues on time and don’t default on any payment is the only way of maintaining a proper credit score. If you have a credit score higher than 800, instant approval is also possible and can help you negotiate better deals. 

  • Home loan tenor 

You must first decide on the home loan tenor before availing of this funding source. The EMI payable is dependent on the period you choose. Usually, many institutions prefer applicants opting for a short repayment term. 

A short repayment tenor is also beneficial for the borrower since it reduces the financial strain of interest and ensures this funding source doesn’t become a source of long-term debt.

Nonetheless, applicants must make a sound call on the tenor since it also impacts EMIs. A short tenor leads to higher EMIs and vice versa, and thus, must be assessed accordingly. 

  • Interest rate 

Home loan interest rate is a factor that you must check before applying. Conduct proper market research and find out the interest rate at which different lenders are extending a home loan. 

Moreover, one must note there are two types of interest rates – floating and fixed. Fixed interest rate, as the name suggests, remains similar throughout the repayment period. However, floating interest rates are calculated based on MCLR and change over time. It is always favourable to choose floating over fixed interest rates. 

  • EMI 

Usually, the amount of EMI payable is dependent on the home loan amount, repayment period, and interest rates. It is also regulated by the down payment amount. Covering a larger sum in down payment reduces the monthly payment burden. It is also recommended that your monthly EMI shouldn’t exceed 45% of your total income. High monthly EMI cost will eventually lead to depletion of your savings. 

  • No prepayment penalty 

As per RBI guidelines, no institution or NBFC is supposed to charge a prepayment penalty. The applicant has the right to make partial payments. An institution can charge a foreclosure penalty for repaying the home loan before tenor.

However, if you opt for a floating interest rate, institutions cannot charge any foreclosure penalty. 

If you consider these aspects before applying for a home loan, it will reduce your financial burden and prevent any unnecessary long-term debt accumulation. Alongside these, also consider additional facilities like a pre-approved offer when selecting a financier.  

Such offers make your home loan application process easier and faster. These offers are available on various products, including a home loan and a loan against property. Check your pre-approved offers by providing your name and contact details. 

Home loans are big-ticket funding sources. Therefore, consider all aspects before you apply for one to make the most of this credit facility.

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