The home loan market has witnessed significant growth in the present time. The growth rate is promising for individuals seeking a home loan. Home loan offers financial assistance to individuals aspiring to buy their dream shelter by considering their future earning and repayment capacity.
Individuals must know what home loan is and the factors to consider before apply home loan.
10 important factors to know before applying for a home loan
An aspiring home loan borrower must give attention to the following crucial parameters while availing of a home loan:
-
Research on loan option
Individuals need to have a fair share of knowledge about the varied home loan options available in the market. It’s wise to research properly than to repent later. Borrowers must research the following aspects – down payment, EMI amounts and repayment tenor to choose a convenient home loan amount at an affordable interest rate.
-
Maintaining a decent credit score
The credit score is one of the significant parameters that every financial institution checks before providing any loan to its customers. A credit score determines a borrower’s credibility, showing how well one manages and clears previous debts and credit card payments. One with a CIBIL score of more than 750 will get a better interest rate on the home loan amount. Financial institutions charge more if the borrower has a low credit score.
-
Home loan Interest rate
Individuals must check the varied home loan interest rate offered by lending institutions. A lower interest rate on the loan amount will help borrowers manage their finances better. Go for a low interest rate to make the entire home loan process hassle-free.
-
Choose suitable EMIs
EMI is the monthly payment that a borrower needs to pay towards the home loan repayment. EMI depends highly on the down payment. Borrowers should not let their EMI exceed 45% of their monthly income. Missing out on timely repayment of the EMI will adversely affect the interest rate.
-
Keep updates on the changing repo rate
The changing repo rates significantly impact the rates of home loans. When RBI reduces the repo rate, the interest rate offered by the financial institutions on the loan amount also reduces.
-
Home loan tenure
Repayment tenor and EMI payouts go hand-in-hand. A longer tenor will reduce the EMI amount; however, the interest rate charged on the customers will increase. Choosing a short repayment tenor with higher EMI payouts is highly advised. Individuals must know how to trim home loan tenor to avail themselves of an affordable home loan.
-
Home loan eligibility and documents
Borrowers need to cater to the eligibility criteria and attach the necessary documents to expedite the lending process. Some documents required for a home loan are as follows:
- KYC documents
- Employee ID
- Salary slips
- Proof of business for a minimum of 5 years (self-employed individuals)
- Bank account statements for the last 3 months (salaried) and 6 months (self-employed)
To get an instant home loan sanction letter, individuals must know the factors affecting home loan eligibility.
-
Existing loans
Existing loans impact one’s eligibility to get approval for a home loan. Financial institutions prefer individuals with no pre-existing loans.
-
Down payment
Down-payment or margin money varies depending on multiple criteria such as the credit score, loan amount, age, loan tenor etc. It is ideal to 10%-15% of the total home loan amount to opt for a hassle-free home loan.
-
Additional charges
Apart from paying EMI on the loan amount, borrowers may have to pay a certain amount in the form of a home loan processing fee, administrative, or service charges that the financial institution levy on the borrowers. Individuals should discuss these charges before the loan application.
Borrowers must check the points mentioned above before availing of a home loan. Furthermore, borrowers can also check the pre-approved offers extended by leading NBFCs on financial products like home loans, loans against property, etc., by entering their name and contact details.
On the whole, availing of a home loan is a significant financial decision. A slight mistake can cost severely. Therefore borrowers must adhere to the factors before loan application to make the lending process hassle-free and permissive.