If you’re looking to apply for a home loan, few things must be taken into account before signing on the dotted line. This will help avert the possibility of any regrets in the future. Read to find out more.
Want to buy a house but pretty sure you don’t have a sizeable amount saved up to afford it. Relax! Financial constraints are no longer an obstacle to purchasing a property. Thanks to the availability of easy and innovative loans options, homeownership is well within reach of most aspirants. While taking out a home loan is a feasible solution, it’s a decision that requires due thought and consideration.
Here are 5 things you need to analyse carefully before taking the plunge.
- Loan Amount & Eligibility Criterion: For starters evaluate your monthly earnings and expenditure to figure out how much money you can borrow without straining your budget. This is important to calculate the down payment and regular repayment options. The eligibility criterion for sanction of loan is determined by lenders based on factors like income, age, occupation, credit history, credit score, repayment credibility, etc.
- Fixed VS Floating Interest Rate: The significance of the interest rate on loan cannot be stressed enough. This can make a massive difference to your EMI outflow. Remember, lower the rate, lower will be your monthly instalment. Home loans can be availed at either fixed or floating interest rates. While the former remains constant throughout the loan tenure, the latter fluctuate as per the market dynamics. Also, fixed rates are usually more expensive than floating ones hence weigh both options precisely before taking a call.
- Select a Suitable EMI:Equated Monthly Instalment (EMI) is the payment you need to make to the lender every month against the home loan. It includes the principal sum along with interest on the remaining loan amount. The EMI also has a bearing on the down payment made at the time of purchasing the property. The thumb rule is that the EMI must not go beyond 45% of the borrower’s total income.
- Check Fees and Charges: Besides the interest rate, the home loan application process comes with various service charges and processing fees. Since these have to be borne by you, the borrower, they can makea significant impact on the repayment amount. It’s, therefore, crucial to be aware of these added costs at the onset. And yes, make sure to choose a provider that levies a very reasonable processing fee.
- Shop Around to Choose Lender: There is no dearth of lenders offering home loans out there, hence shop around to make an informed choice. Compare interest rates along with charges, fees and more other costs across different providers. Also, check out repayment options, prepayment terms/conditions, penalties, customer care, etc. In addition to providing a clearer perspective, it will help you clinch a deal that works best for you.
As you can see, factors like loan eligibility, type of interest rate, EMI payments, applicable fees, and more play a pivotal role in the housing loan application process. Keeping these aspects in mind will ensure your entire loan experience is simple, quick and hassle-free.
