8 Points to Consider Before Applying for Housing Loan

Everyone dreams of owning their own dream home, and the majority of people have enough savings to make such a large purchase. A home loan is one of the most popular methods of purchasing a home because of the offers you receive based on eligibility criteria such as low interest rates, long term tenors, sizable sanction, minimal documentation, and quick approvals. Because there are many lenders available in the market, such as banks and NBFC, it is in your best interest to approach multiple lenders to receive the best possible offers for the money that you are spending.

A home loan generally requires extensive financial planning because it is a once-in-a-lifetime purchase, and it is critical that you approach multiple lenders to receive the best available market offers. Here are 8 points to think about before apply for home loan:

Credit Score

The borrower’s credit score is one of the most important factors to consider when applying for a home loan because your CIBIL score determines your current financial situation and payment history. To receive favorable lending terms, you must maintain a healthy CIBIL score greater than 750. A healthy CIBIL score indicates to the lender that you are responsible and creditworthy.

Interest Rate

Salaried and self-employed applicants can both apply for a home loan with an attractive interest rate starting as low as 8% per annum, and if you meet the eligibility criteria, you may even receive a lower interest rate.

Tenor Period

A home loan is an expensive purchase, and borrowers will need time to repay the loan. Lenders understand this, which is why with a home loan, you can choose a long-term tenor that ranges between 25-30 years, which can help you repay your loan in a comfortable manner with the help of reduced EMI’s.

Documentation

In order to receive approval for your home loan application, you will be required to submit a prescribed set of documentation in the given order. If you fail to submit any documents, your loan may be delayed as well as rejected.   

Down Payment

A lender will only lend up to 90% of the value of your home, with the remaining amount coming from you as a down payment. You must have enough savings to cover additional costs such as the stamp down payment, stamp duty, and processing fees.

Prepayment 

Prepayments against your home loan are permitted by lenders without incurring additional fees.

Foreclosure

You have the option of foreclosing the entire loan before the tenor period to save a significant amount of money. Banks will charge you a foreclosure penalty if you choose a fixed interest rate, but no foreclosure penalty is applicable if you choose a floating interest rate.

 Monthly Installments 

The lender will assume over 50% of your income for home loan repayment, so it is in your best interest to clear your existing debts before applying for a home loan so that you can allocate the necessary funds towards repaying your home loan EMI.