10 things you must know before you apply for a home loan
Usually, while making investments in residential properties, individuals depend on housing credit facilities as it involves a substantial amount. Besides, the availability of different housing schemes extended by the government, obtaining housing credit has become more simplified. However, the overall repayment process can be expensive if one does not choose the tenor and interest rate carefully.
Since several factors are associated with home loan process, customers should be aware of them before apply for a home loan.
Factors to consider before acquiring a housing loan
With the RBI’s decision to keep the repo rate at 4%, many financial lenders have significantly reduce their lending rates, encouraging borrowers to obtain home loans and fulfil their dream of having their own home without straining their finances. However, prospective borrowers must be careful before they apply for home loan. To make the repayment convenient and streamlined, here are some things that they must be mindful of:
- Research different loan options
With advancement of internet, individuals can look for ample information and conduct extensive research regarding options available in market before applying for loan. While researching the affordable loan options in the market, one must consider EMIs, repayment tenor, interest rate, and down payment factors.
Researching about these factors beforehand will enable borrowers to opt for a suitable home loan at affordable interest rates. Since housing credits involve a considerable amount, it is wise to uncover all the application details.
- Assess affordability before applying
While choosing home loan options, one must consider repayment affordability. Applicants should factor in additional monthly expenses excluding the EMIs and maintain a stable income to meet emergencies.
- Choose affordable EMIs
While availing any credit facility, financial institutions offer different EMI options to the borrowers to suit their financial requirements. EMIs also rely on down payment because if borrower makes substantial down payment at time of availing credit, EMIs is reduce. Therefore, the higher the down payment, the lower the EMI.
- Loan tenor
This is significant factors to consider when applying for housing loan. While choosing an extended loan tenor, EMIs will be reduce but interest component will increase. If borrower has stable income and plans a budget, suggested to opt for shorter tenor and pay higher EMIs. Choosing such a tenor will attract lower interest rates and encourage faster repayment.
- Maintain high credit score
A borrower’s repayment track record and CIBIL score play a significant role in determining housing loan eligibility. Usually, reputed financiers seek a CIBIL score of 750 or above to assess borrowers’ creditworthiness. Borrowers will have higher loan approval and disbursal chances with a decent credit score. Apart from knowing what is CIBIL score, borrowers must adopt specific financial strategies to improve it and ensure a hassle-free loan approval.
- Spend wisely
Once borrowers start servicing their home loans, it is wise to plan a budget to meet EMIs successfully. To avoid overdue or increased interest rates, customers must pay their EMIs on time and maintain credibility.
- Check eligibility
Before applying for home loan, individuals check eligibility parameters to understand their chances of availing loan. In this case, can take help of eligibility calculator to know exact amount they are eligible for.
- Pre-payment or foreclosure norms
Borrowers can choose to prepay some amount to reduce the outstanding principal and interest paid and the repayment tenor. To know how much one can save on the interest, he/she can use a home loan part prepayment calculator by entering details like loan amount, tenor and interest rate.
Besides, if borrowers want to foreclose a loan but charges are high, in case, they choose loan balance transfer facility to lender offering lower rate of interest.
- Additional charges
Besides EMIs, there are other administrative, service or processing charges that lenders impose on borrowers during loan applications.
- Arrange documents carefully
While applying for loan application, individuals need to go through documentation to have comprehensive knowledge regarding requirements when applying for loan.
Apart from these, eligible borrowers can also avail pre-approved offers extended by reputed financial institutions on a wide range of secured and unsecured financial products. These offers significantly reduce the hassle of documentation and save time. Therefore, customers can check their pre-approved offers by mentioning their essential credentials.
Thus, borrowers need to carefully learn these factors before they apply for a home loan. By knowing these factors, they can ensure availing affordable home loans and hassle-free repayment.