A home loan can provide financial assistance to you for purchasing a house. If you're planning to borrow a home loan, then there are a few important things that you should understand.
Buying a house can cost a huge amount of money. This can be difficult for most homebuyers. Therefore, many prefer home loans to finance their purchase.
Home loans provide you with the funds required to buy a house. Furthermore, there are different types of home loans, and you can avail a loan based on your requirements.
Some of the types of home loans are-
A home purchase loan is the most common type of home loan. This loan can be availed to purchase a pre-owned or new house.APPLY NOW
The EMIs or equated monthly instalment is the amount that you are obliged to the bank as part of the repayment process. Typically, the banks offer different EMI options to suit the varying needs of the borrowers. The EMI greatly depend on the down-payment amount you pay; the higher the down payment, the lesser will be the EMI. Experts suggest that the EMI you chose must not exceed 45% of your income.
If you plan to construct a house instead of purchasing a pre-constructed home, then you should consider borrowing a house construction loan.
The approval of your home loan application will depend on the housing loan eligibility requirements of the lender. Here are the factors that lenders consider when assessing your eligibility-
• Credit Score
The lender will check your credit score when you apply for a home loan. If you have a high credit score, then availing a home loan can be easy for you.
Age is also a crucial factor that impacts the eligibility requirements. The lender will check the number of working years you have remaining.
• Employment and Income
Generally, lenders prefer giving loans to people who work for reputed companies. They also check the applicant’s income. Applicants with a higher income can get loans easily.
• Repayment Capacity
One of the most important factors that a lender will consider is your repayment capacity. They’ll check if you have sufficient funds to repay the existing debts along with the home loan’s EMIs.
Submitting the required documents is one of the most important things you must do when applying for a housing loan. Here are some necessary documents that you’ll need-
• Credit Documents
The credit documents enable the lender to know whether you’re a reliable borrower. You’ll have to submit documents like salary slips, income tax returns, etc.
• KYC Documents
In case of KYC documents, you’ll need to submit your address and identity proofs. You’ll have to submit documents like Aadhaar card, Passport, PAN details, etc.
• Property Documents
The property documents consist of the title deeds, the agreement to sell, etc.
In order to pay off your home loan, you’ll have to repay the principal amount along with interest. The housing loan interest rates will vary from one lender to another. Therefore, comparing the interest rates becomes crucial when selecting the most affordable loan. Furthermore, you must choose between the types of home loan rates. You can choose between a fixed interest rate loan and a floating interest rate loan.
• Fixed Interest Rate Loan
The rate of interest is fixed at the time you avail a loan in case of a fixed interest rate loan. The interest rate stays the same during the tenure of the loan.
• Floating Interest Rate Loan
In case of a floating interest rate loan, the interest rate is linked to the lender's benchmark rate. Therefore, any change in the benchmark rate can lead to a change in the rate of interest.
One of the mistakes that many people make when applying for a home loan is submitting multiple loan applications. Making multiple loan applications can impact your the credit score. of the applicant.
The lender checks your credit score when you make a home loan application. In case of multiple applications, different lenders will check your credit report. This can harm the credit score.
Multiple loan applications can cause the credit score to reduce. This might lead to the rejection of a loan application. Therefore, it’s wise not to submit multiple loan applications within a short duration.
While interest rates are an important factor, checking the lender’s charges is also crucial. These charges are levied when you avail a home loan. Some of the most common charges are- processing fees, late payment charges, pre-payment charges, foreclosure charges, etc.
There are additional costs that will also get levied, like documentation charges and GST. These charges can increase the cost of the home loan. Therefore, you must know the charges levied by the lender before applying for a housing loan.
The process of borrowing a home loan can be difficult. But if you keep these points in mind, then it can become easy for you to apply for a home loan.