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Applying for a Home Loan? 4 Things to Keep in Mind

IndianMoney.com Research Team | Posted On Monday, June 10,2019, 11:22 AM

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Applying for a Home Loan? 4 Things to Keep in Mind

 

 

Purchasing a house of your own is a dream that you strive to achieve. It is a long-term goal as the money required to fund the purchase of a house is quite large. Today, banks have made it easy for people to own a house by availing home loans.  Home loans are secured loans sanctioned by the banks for the long-term and repayment of these loans takes a long time. 

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Applying for a Home Loan? 4 Things to Keep in Mind

In order to remain on the safer side, make sure to go through the following points before applying for a home loan:

1. Get Your Credit Report:

This is one of the first steps you must take before applying for a home loan. Checking credit report and credit score is important as this tells you if the home loan would be sanctioned. Banks consider credit score to be important eligibility criteria for sanctioning of the home loans. A credit score of 750 and above is considered to be good as this shows excellent repayment ability and the capability to manage debt. A credit score is a numeric representation of creditworthiness, determined based on credit card usage, loan repayments, credit card and loan applications and debt management. A good credit score helps negotiate the rates of interest and terms of the home loan.

See Also: How to Select the Best Home Loan?

2. Meeting Eligibility Criteria:  

Approval of home loan requires the applicant to fulfil certain eligibility criteria set by the lender. Each lender has its own set of eligibility criteria, which must be met in order to get the home loan sanctioned. The general eligibility criteria for home loans are:

  • Age: An Indian citizen can apply for a home loan if he is 21 years of age or older. However, the home loan must be repaid in full before the age of 60 or retirement. The home loan tenure would be determined, based on the age of the borrower. Calculate home loan EMIs with IndianMoney Home Loan calculator.
  • Income: Income is an important aspect for the approval of home loans. As banks sanction a large sum of money, higher the income higher the eligibility. The banks calculate the loan to income ratio of the applicant, to make sure the borrower is capable of repaying the home loan.
  • Documents: Banks and other financial institutions verify the submitted documents and then approve your home loan. Any mismatch in the information provided can lead to a rejection of your home loan. So, make sure all documents required for a home loan are in place.

See Also: Tips For Home Loan EMI Repayment

3. Keep Down Payment Ready:

This is the next crucial step you must take. Make sure you have the down payment ready. The bank only funds 80-90% of the cost of the property you wish to purchase. You have to finance the remaining amount. A down payment is a lump sum amount that you pay to the seller in order to finalize the deal. A down payment instils confidence in the seller and guarantees that the buyer will not back out. The seller stops looking for other prospective buyers and the deal is finalized. Keep in mind the property rates in your city and plan accordingly, for the down payment.

4. Fixed or Floating? Interest Rate Dilemma:

Many home loan buyers are unaware of the interest rate options and often end up choosing the wrong home loan. Interest rates on home loans are of two types – fixed and floating. In case of the fixed interest rate, the borrower pays the same interest across the tenure of the home loan. In case of the floating interest rate home loan, the interest fluctuates according to the market interest rates. If repo rates go down, expect home loan rates to fall. Lock-on to the home loan based on your requirement and financial standing.

See Also: Processing Fee For Home Loan

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