Buying your dream house is one of the most crucial financial decisions you would make in your life. Most people prefer taking a home loan instead of using up their savings. However, getting a loan according to your needs may be a little confusing. There are lots of formalities and conditions you need to fulfill before getting loan approval. Home loan borrowers, especially those taking it for the first time, should be aware of these top 10 things to consider before a home loan application.
Below are the 10 most important things for a home loan:
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Check Credit Score:
Your credit score is of the essence while applying for a home finance loan. It is an indication of your repayment history and past credit behavior, based on which lenders consider your loan amount and interest rate. Check your credit score and ensure it is above 700 to get a loan at favorable terms and conditions. If it is low, you may improve it by paying off your existing loans, reducing your credit utilization ratio, and staying consistent with your EMIs and credit card bills.
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Compare Interest Rate:
Don’t forget to check the home loan interest rate different lenders offer. Your aim must be to find a loan with the lowest interest rate. However, the interest rate is not the only factor you should consider while finalizing your lender. There are several other factors, like fees, insurance, and other terms and conditions.
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Ensure High Loan Eligibility:
Lenders determine several factors while assessing your loan eligibility. These include your age, income, employment, credit score, and property’s condition. The higher your eligibility is, the bigger loan amount you may borrow. Use a home loan eligibility calculator to know your eligibility and make an informed decision.
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Ask the Interest Type:
Lenders offer two types of housing loan interest rates: fixed and floating. The rates remain the same throughout the loan term in case of a fixed interest rate, and they keep fluctuating with the market rate in case of a floating one. Select the one you feel safer with.
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Select the Right Tenure:
Home loan lenders offer flexible repayment terms to borrowers. You must use a loan EMI calculator to find a loan term with an EMI amount suitable to your budget. Selecting the right tenure will keep EMIs affordable and repayment more manageable.
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Select the Right Tenure:
Lenders offer flexible repayment terms to borrowers. You must use a home loan EMI calculator to find a loan term with an EMI amount suitable to your budget. Selecting the right tenure will keep EMIs affordable and repayment more manageable.
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Keep Documents Ready:
Although NBFCs have minimal documentation requirements these days, they ask for a few essential documents to verify your identity, income, creditworthiness and address. You must also provide the complete set of property documents for evaluation.
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Save for a Bigger Down Payment:
NBFCs lend a significant percentage of the property’s price as a loan. You have to pay the remaining amount from your savings. The bigger the down payment you make, the less you have to borrow, and lower will be your total loan cost. Therefore, try to save money for a bigger down payment before applying for a home finance loan.
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Enquire About Additional Charges:
Principal amount and interest rates are not the only costs you have to pay to the lender. Several additional charges are involved, like processing fees, administrative charges, etc. Discuss these charges with the lender before applying for a home loan.
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Have a Robust Repayment Plan:
Taking a home loan will be a wrong decision if you fail to repay it on time. Defaulting on a loan will lead to hefty charges and penalties and eventually result in your home foreclosure. Therefore, assess your budget and evaluate your repayment capacity to ensure that you can pay off your loan EMIs. This is why most lenders offer flexible repayment tenure with a home loan EMI calculator. It allows you to choose an EMI amount that you can conveniently adjust in your monthly budget.
It is crucial to keep these ten points in mind before applying for a home finance loan. With these, you can avail of the right loan offer suitable to your requirements, reduce your loan cost, and manage its repayment in a better way.
Must Read: Why Use a Home Loan Calculator? And How does it Work
