Buying a house, be it an apartment or a villa, is a major decision, especially on the financial front. Taking a home loan is every first-time home buyer’s doorway to owning their dream home and understanding what’s in store is crucial to make the right choice. Here are 10 things every home loan seeker should know before signing the dotted line:
- Eligibility: Knowing whether you qualify for a home loan is the first step in getting to your perfect home. Banks will assess your eligibility for the house loan based on your income and capacity to repay the amount. Age, Qualification, Financial Position, Number of Dependents, Job Stability and your Spouse’s income also forms the basis of the eligible criteria
- Type of Home Loan: The bank offers different types of home loans, out of which you can choose the one best suited for you. The three types of home loans available are:
- Adjustable/Floating Rate Loans: In this type of loan, the interest rate is linked to the stand interest rate set by the bank. As and when the standard rate changes, there will be a proportional change in the interest rate as well
- Fixed Rate Loans: In this type of home loans, a fixed interest rate is applied at the time of sanctioning the loan. Throughout the tenure of the loan, the same interest rate continues
- Combination Loans: These type of home loans offers a part of the loan amount at a fixed rate of interests while part of it will have an adjustable or floating rate of interest
- Loan First: Before you start house hunting, it is advisable to get your home loan pre-approved. This will help you set a budget and narrow your search to suitable properties. Having a pre-approved loan will also help in better negotiation and close deals faster. The bank will have properties approved by them, which will reduce the number of documentation required and give you a better selection of quality-properties.
- Loan Amount: The housing loan amount ranges from 75-90% of the cost of the property, based on your loan value. The bank provides a suitable loan amount after taking your loan eligibility into consideration. The loan amount can be increased by adding a co-applicant to the loan, whose income the bank will evaluate before approving the amount.
- Cost of the Home Loan: While analyzing the suitability of a home loan, take the cost factor into consideration. The home loan cost will include processing fees, interest payments, administrative charges, prepayment penalties etc.
- EMI: EMI or Equated Monthly Installment is the amount you will be paying the bank on a monthly basis. The repayment instalment of the loan amount includes the principal amount and the interest on the outstanding amount of the loan.
- Tenure: Based on the customer’s eligibility, home loans can be sanctioned for a maximum tenure of 30 years. Longer the period of the loan, lower the EMIs.
- Documentation: The mandatory documents required for the sanctioning of a home loan are KYC documents, Credit/income documents and property documents.
- Insurance: Purchasing a loan cover term assure plan is important to cover the loan amount. Do some research on the best home loan insurance available in the market.
- Default: You are advised to be regular in the EMI payments. If more than 3 installments are missed, the bank has the authority to take direct action against the defaulter without any court intervention. In case of financial difficulties, it is best to inform the lending bank at the earliest and check the possibility of getting an extension in the repayment tenure.
Talk to financial experts in case of any queries. RoofandFloor.com is your one-stop platform to any property related concern.