Owning a comfortable and spacious house in a peaceful neighborhood is everybody’s dream. Contrary to popular opinion, housing isn’t an extravagance but a fundamental necessity that everyone should own despite their economic standing. Here’s where housing loans can come to your rescue.
Arranging money for your ideal living space can seem like a daunting task. Nevertheless, your financial anxieties can reduce significantly upon receiving aid from banks and financial institutions. A home loan is a financial tool that you can turn to when you need funds to build, buy, or redecorate a house.
To create a loving abode for their loved ones, people often get confused between opting for a sizeable home loan or sacrificing their entire life savings. However, with careful financial planning, you can lock on the most affordable home loan interest rate. An ideal credit tool like a housing loan is always a safer decision than breaking into your hard-earned investments.
Home loan aspects such as EMI, tenure, and credit check can appear overwhelming to new home buyers. Moreover, the scrutinized documentation process that precedes any loan application can send young applicants into a state of frustration. But with a short checklist that explains the pre-requisites of a home loan, the seemingly complicated process can be made simpler. By following the tips mentioned below, you can begin the next phase of your familial life with ease and comfort.
1) Credit Score Check
Delving into real estate is an expensive affair. Since it is a valuable, tangible asset, you need to secure substantial capital. Home loans are high-profile loans that demand crucial commitment on the borrower’s part. To ensure this, lending institutions always verify the credit score of applicants. A credit score is a numerical value that represents your credit behavior. To put it simply, it helps banks and NBFCs determine how sincere you are about clearing your debts. Your credit history includes credit utilization ratio, repayment history, use of secured and unsecured credit, etc. If you possess a credit score above 750, it highlights the image of a responsible and capable borrower. To achieve a decent credit score, you must adhere to punctual payments, minimize your credit spending, and clear off your existing loans.
2) Down Payment and EMIs
As per the regulations announced by the Central Government and RBI, banks, NBFCs, and housing finance companies can grant home loans only up to 80% of the property value. The rest has to be paid upfront by the buyer. Hence, if you plan to take a home loan, you must have sufficient money to cover the remaining 20%. Utilizing your entire pool of resources towards buying a house may not be the wisest decision since it might leave you with an economic crisis. Similarly, you must assess the monthly installments you will be paying to clear your loan. As you will be devoting a large chunk of your monthly income towards clearing your loan, you should be aware of your EMI figure. Even after securing the best home loan interest rate, if you have pennies left in your bank account, you may want to reconsider your loan plan. To know the precise EMI, you can avail the online EMI calculator facilities by banks on their websites.
3) Document Preparation
Fulfilling banking parameters plays a big part in maintaining personal finances. It is true even in the case of a home loan. One of the first and foremost tasks to secure a loan, any loan, is to arrange for the necessary documents. Managing the mandatory paperwork beforehand can save you a lot of time. It also helps in creating a good impression on the banking authorities. These are some proofs that you must be ready with – Aadhar Card, PAN card, Passport, Income Tax Returns, Salary Slips/ Employment Proof, and Bank Statements of the past year.
4) Avoiding Multiple Applications
Sending applications to multiple lenders is a rookie mistake made by most candidates. Rejection from various banks can put you on a back seat with your home loan process. It can paint the picture of a borrower who is desperate to receive funds. Prudency is of utmost importance as you research the home loan schemes offered by finance establishments. But steer clear of sending out numerous applications in hopes of being accepted by any one of the lenders.
To conclude, approval of a home loan application depends on many factors. By fulfilling the eligibility criteria, preparing the necessary paperwork, and clearing your credit history, you can seal on the most affordable home loan interest rate.