6 Points To Remember Before Applying For A Home Loan

For most of us, buying a home, especially our first home, is a personal achievement that we wish to achieve. However, with the skyrocketing real estate prices, taking a home loan becomes imperative to fund the purchase of a new house. With the online application process and faster loan disbursal, getting a home loan has now become easier than ever.

So, if you are considering taking a home loan, here are six things you should know before applying for one.

The home loan's interest rate is linked to your credit score. Most home loan providers offer loans with a low-interest rate for applicants with a CIBIL score of 750 or more. This will help you borrow a higher amount at a lower cost. So, you must maintain a good credit score while applying for a home loan.

You must take note of the lender’s home loan eligibility criteria while applying for a home loan. Most home loan lenders have strict parameters that you must meet to qualify for a home loan. These may include your income and repayment capacity, your job, age, number of dependents, etc. Moreover, if you are applying for a loan, the lender will also consider the co-applicant’s income.

Before finalising your lender, you must check the home loan interest rates of various banks and financial institutions and pick one that suits your budget. Before that, you must know about the two types of home loan interest rates- floating and fixed. The floating interest rates are calculated on the basis of the Reserve Bank of India’s base rate. Such interest rates are subject to change over time. On the other hand, fixed interest rates remain constant across the home loan tenure.

Also Read: How RBI Repo Rate Hikes Impact Home Loan EMIs, Housing Demand

Your home loan EMI amount depends on your home loan tenure. Hence, you must decide the tenure before availing the home loan. Lenders ideally prefer to offer home loans to applicants who choose a shorter tenure. A short tenure is also beneficial for you as an applicant as it reduces the burden of home loan interest on your EMIs. With a shorter repayment tenure, your EMI amount may increase, but eventually, it will help in reducing your home loan cost.

The documentation required to apply for a home plan can be put it three categories:

• KYC Documents: These will include your address and identity proof like your Aadhaar card, voter ID, passport, etc.

• Income Documents: These are required for the lender to assess your home loan eligibility. You can submit your salary slips if you are employed, or you can submit your income tax returns for the last 3 years if you are self-employed.

• Property Documents: These will include the agreement of sale, the title deeds, etc.

Usually, lenders will ask you to pay 10-15% of the total home loan amount upfront as a down payment. The remaining amount will then be payable as your home loan EMI. You can choose to increase your down payment amount if you have surplus cash as this would reduce your home loan interest cost.

Buying your own home is an important financial decision. Now that you know about the important things to keep in mind before applying for a home loan, you must plan for this well in advance and take a home loan responsibly so that you are not burdened by the debt in the long run.