The recent revision of repo rate by the Reserve Bank of India has made home loans more accessible and affordable. Therefore, aspiring homebuyers can now go ahead with their plan and avail a home loan at more competitive interest than before.
However, before applying for a home loan, individuals must keep in mind some points that will make their application process smooth and hassle-free.
Consider These Points Before Applying for a Home Loan
- Credit score
A credit score is a three-digit number that portrays the creditworthiness of an applicant. It ranges from 300-900, and any score above 750 is considered as an excellent one. Thus, individuals planning to avail a home loan must keep a credit score of 750 or above to negotiate better terms with their lenders.However, in case they do not have the required credit score, one can consider taking short-term loans and repaying them successfully or clear existing debt to improve this rating.
- Interest rate and tenor
Two of the most important factors to consider before availing a home loan are its repayment term and rate. There are two types of interest rate, fixed and floating. The fixed-rate stays unaffected by the market fluctuations and remains constant throughout the tenor. Whereas the floating rate fluctuates according to the market conditions. Both of these rates have their advantages and disadvantages; thus, applicants must gather ample information before deciding.Typically, the tenor of a home loan is around 20 years, but it can be higher depending on the lender. However, if the loan tenor is higher, then it will increase the total interest payable amount. Thus, one must strike an ideal balance between tenor and EMIs.
- Additional charges
A home loan has several additional costs associated with it. For instance, processing fee, legal fees, service tax, verification charges, etc. Consider these charges before availing a home loan and if necessary talk to the lender to know more.
- Keep the down-payment ready
Financial experts always recommend a hefty down-payment as it lowers the total debt. Therefore, individuals should prepare a substantial corpus before applying for a home loan. Paying this money upfront will not only reduce their total cost of borrowing but also make their EMIs more affordable.
- Documents in order
Applying for a home loan requires applicants to submit an extensive set of documents. It includes their personal documents as well as property papers. Keeping the documents required for home loan handy will make the loan application and verification process smooth. Failing to provide adequate documents is one of the important reasons why lenders may reject a home loan application.
- Part prepayment and foreclosure
These are two essential features to have with a home loan. It allows borrowers to repay their loan in parts or the entire amount at once and close it. However, lenders may or may not charge additional fees for part pre-payment or foreclosure; thus, individuals must consider these charges before availing a loan.
- Late payment charges
Lenders often charge penalties in case a borrower fails to pay his/her home loan EMI on time. This is another factor to consider before availing a home loan.
- Pre-approved offers
Prominent HFCs of the country provide pre-approved offers on their home loans apart from competitive interest rates and flexible tenor. It makes the loan application process smooth and less time-consuming. Apart from home loans, these offers are also available on loan against property, mortgage loans and more. Individuals can check their pre-approved offers by submitting their essential contact details.Before applying for a loan, individuals must fulfil the home loan eligibility criteria. Usually, these include the following –
- Applicants should be an Indian resident
- Their age must be in the range of 23-62 years for salaried individuals and 25-70 years for self-employed ones.
- Salaried individuals should have work experience of 3 years or more. Self-employed applicants should own a business that is at least 5 years old.
- KYC documents
- Address proof
- IT returns and balance sheet of the company for self-employed and Form 16 or latest salary slip for salaried individuals
- Bank account statement for the last six month
Home loans involve a substantial amount of debt. Thus, making an informed decision at the beginning is imperative. Applicants must get all their home loan queries answered before availing a loan to ensure hassle-free repayment.
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