Owning a home is, by all means, a significant achievement that requires a lot of paperwork, preparation, and resources. Although a home loan will almost certainly help you buy a property, a misunderstanding can be detrimental to your financial health. Hence you need to understand critical pointers that would help as a first time home loan applicant.
The application phase
Comparison of home loans
Due to an increased demand for home loans, multiple lenders provide personalized loans to the borrowers. Hence as a borrower, you need to assess various criteria like interest rates, loan tenure, charges such as processing fees, foreclosure charges, etc. to decide on the potential lender.
Verification of property
Before agreeing to purchase the house, however, it is necessary to verify the property title, builder/developer, etc. Not only will it allow you to eliminate the possibility of fraud, but it will also allow you to appreciate the project’s reputation. Before making a plan to apply for a home loan, make sure that you have checked the property title and other documentation.
The housing loan interest rates
Borrowers can choose to take out a loan at fixed or floating interest rates. Fixed interest rate home loans would require a fixed amount of EMI to be charged every month unless there is a drastic shift in the economy that causes the lending institution to revise the interest rates. Alternatively, floating also adjust depending on the economy, which often means that over the tenure, the borrower will be expected to pay a lower interest rate on several occasions.
The credit score is assigned by credit bureaus and reflects the credit repayment capacity of an individual. The credit score is used to test loan applications by lending agencies, which partly decide if they are accepted or denied. Make sure you have a higher credit score before you plan to buy a property with a loan.
Home loan tenure
The loan tenure or term impacts the EMI. A greater EMI may be needed for home loans with a shorter loan period. The option of a longer-term for lower EMIs, however, would result in the payment of an overall higher interest sum.
You will need to decide how much you will pay before you start the loan application since most lending institutions can offer up to 80 per cent of the cost of land. There are more chances of getting accepted if you apply for a home loan with a co-owner such as your wife/husband.
A home loan is an important financial commitment that can span over decades, and hence a borrower should be mindful about the best lender for his/her requirements.