A Home Loan is essentially a credit that you avail from a bank or a housing finance company, to fund your purchase of a desired residential property. In the present-day times, thanks to the digitization of the market as well as increased competition, obtaining a Home Loan has become hassle-free and convenient.
However, you shouldn’t take any aspect of this big-ticket loan for granted. Given the bulk of loan amount and the ostensibly long repayment tenure, you must tread the waters as carefully as possible.
Listed below are some do’s and don’ts to help you stay on the right track as you apply for Home Loan.
Make Sure the Home Loan is Affordable
More often than not, purchasing a home is a once-in-a-lifetime feat, and you will be tempted to go all out in a bid to get that perfect home. As alluring as it might be, to stretch your budget and buy a bigger, more comfortable, or a luxuriant property, you must make sure that you take into account your income, living expenses, present, and future financial obligations, and then build a realistic budget for the home purchase. You should apply for a Home Loan, keeping in mind that the EMI doesn’t exceed 25-30% of your monthly income, thereby giving you ample space to fit in other expenses without straining your financial health.
Research the Market to Find the Best-Suited Loan Option
While offered at competitive interest rates, a Home Loan is still an enormous financial commitment, which warrants proper research from your end. Rather than applying to the first home loan provider, you come across; you must take the time out and research as many as four to six loan providers. Right from comparing the basic features such as home loan interest rates, repayment terms, and tenures, to digging deeper into aspects such as processing fee, additional charges such as that for documentation, legalities, etc. you should do it all. That being taken care of, you should then opt for the loan alternative which best suits your needs, while being as cost-effective as possible. PNB Housing Loan is one of the cost-effective products in the market.
Check your Credit Score Before Applying
This is one aspect that a large majority of loan applicants tend to ignore. Before you go ahead and apply for a loan, you must understand that the loan provider will only accept your application if your credit score is 700 or above. A score lower than that will either lead to the rejection of your loan application or would attract a higher rate of interest, thus raising the overall cost of your loan. Given the importance of your credit score, it is highly recommended that you order a copy of your Credit Report beforehand, and skim through it.
If you find that your score is lower than 700, you should take the necessary steps to improve the same, and only then apply for a loan. Improving your score may take anywhere between 3 to 6 months, but the benefits you will reap will be completely worth the wait. Though, with the lower score, you can eventually apply for a Home Loan from an NBFC, such as Tata Capital Home Loan.
Opt for an Excessively Long Repayment Tenure
When you set out to Apply for a Home Loan, you will be tempted to opt for a longer tenure, as it will considerably reduce your EMI. For instance, if you apply for a Home Loan for Rs. 10 Lakh, at an interest rate of 10% per annum, for 10 years, your EMI will be Rs. 13,215. However, for the same amount, at the same interest rate, the EMI will come down to Rs. 10,746 if you increase the tenure to 15 years. However, in this case, your total amount payable will rise to a whopping Rs. 19.34 Lakh, as against the sum of Rs. 15.85 Lakh, if your tenure was 10 years. Moreover, if you further increase your tenure to 20 years, you would end up paying a massive amount of Rs. 23.16 Lakh.
Hence, even if the EMI seems on the higher end, make sure you don’t opt for an exceptionally long repayment tenure, else you will end up hurting your finances in the long run.
Ignore the Fine Print of the Loan Agreement
Yes, you must have read this already, but we can’t emphasize the importance of reading the fine print of your loan agreement nearly enough. Regardless of how trustworthy your loan advisor is, or the level of trust you have in your loan provider, it is extremely crucial that you go through the terms and conditions of the Home Loan.You must understand the underlying aspects of the same. If you think, you aren’t qualified enough to do so, feel free to hire the services of a legal advisor who will help you grasp all the details before you sign the agreement and are bound by it until the end of the repayment tenure.
Shy Away from Making a Joint Application
There may arise a situation when you may not be eligible for a Home Loan, for instance, if your credit score is low, or your income level doesn’t suffice for the amount of loan you wish to procure. In such a case, you should not hesitate from making a joint application for your Home Loan. This can help increase your chances of getting approved, and can even help you procure the loan at a more competitive rate, Of course, when you do so, you must make sure that your co-applicant knows all about the loan, its terms and conditions, additional costs involved and the consequences of a default, before signing on the dotted lines.