Do’s and Don’ts You Must Know Before Applying for Home Loan
Today, getting a home loan is easier than ever before. While several lenders are willing to offer loans at an attractive interest rate, you must be aware of the Dos and Don’ts to get the best offer.
Applying for a home loan is the most practical solution to get the required funds for purchasing your dream home. Today, with lenders offering loans at a competitive interest rate, getting a loan is easy. But, when you are applying for a home loan, you must be wary of specific things to get the best offer. There are Do’s and Don’ts, which are discussed below:
Opt for a loan that is affordable to repay
When you are buying your first home, it is easy to go overboard and apply for a higher loan amount. But, you must make a financially prudent choice and apply for a loan that is easy to repay. Experts suggest that the EMI of the loan should not be more than 25% to 30% of your monthly income. You can use the home loan EMI calculator to compute the EMI for the amount you wish to borrow.
A home loan is a long-term commitment where you must repay the EMI for several years. Hence, you must do your research well and choose a lender who offers the loan with the most favourable terms. You can read reviews and testimonial online to make an informed choice.
Know your credit score
A credit score is a three-digit number (ranging from 300-900) that reflects your creditworthiness. The lenders consider the credit score as one of the critical factors to determine your eligibility. So, make sure that you check your credit score before applying for a home loan and see if it meets the lender-specific requirement. And if your credit score is low, take immediate corrective steps to improve the score to avoid rejection of your home loan application.
Apply for a joint loan
One of the definitive ways to increase your home loan eligibility is to apply for a joint loan with any of your earning family members as a co-applicant. When you apply for a joint loan, the lender will consider both the applicants’ income, which increases your repayment capacity and eligibility for borrowing a higher amount.
Ignore reading the terms and conditions
Before you sign the home loan documents, it is paramount that you read the terms and conditions carefully and ensure that the terms are favourable to you. If you don’t understand anything or not happy with any terms, discuss it with the lender immediately to get it rectified. If needed, take professional help to understand the meaning of jargons, and sign the papers only if you are 100% satisfied.
Make any big purchase before applying for a home loan
When you apply for a home loan, you must pay a down payment, which amounts to 20% of the property’s value. Making a big purchase before applying for a home loan may affect your financial corpus, and you may be forced to apply for a higher loan, which in turn would increase your EMI and increase the overall cost the loan.
Ignore other costs
Most first-time home loan borrowers tend to shortlist the lender who offers the loan at the lowest interest rate. But, you must know that interest is not the only cost you must bear. There are other expenses, like registration fees, processing charges, stamp duty, foreclosure charges, etc. So, make sure that you consider these costs while planning your finances.
Knowing the Dos and Don’ts mentioned above can help you go through the entire journey of home loan application without any hassles.