Things to Keep in Mind While Applying for Home Loan
Owning a home is a dream for many and to transform this dream into reality, one of the easiest options available is a home loan. Opting for a home loan enables the users to own a home even if the home cannot be purchased by paying the full price. The loan helps in financing the purchase of the home and users need to repay the loan in equated monthly installments. This makes it much easier and convenient to buy a home. But at the time of applying for a home loan, you need to keep a few important things in mind.
Let’s take a look at some of the things you need to know before you apply for a home loan:
1. Check Your Credit Score
The credit score is a matter of immense importance at the time of applying for a home loan. The credit score is basically to check the credit worthiness of the applicants. The lenders mandatory check the credit score of the applicants before approving the loan. Thus, the home loan applicants should necessarily maintain a healthy credit score for getting the loan approved. In an addition to this, a good credit score ensures better rates of interest on the home loans.
2. Rates of Interest
The rate of interest is what the applicants of the home loan should necessarily consider at the time of applying for the loan. The interest rates have a direct relation with the overall repayment amount. The higher the rate of interest, the more the amount to be repaid. You should consider the rates of interest offered by different banks or financial institutions and appropriately compare each one of them to finally select the lender with the best rate of interest. In general, two different types of rate of interest exists. One is the fixed rate and the other is floating rate. Under the fixed rate, the equated monthly installments do not change but under the floating rates, the rates of interest vary from time to time.
Everyone who intends to apply for a home loan should decide on the tenure of the home loan before availing the same. Usually, the tenure offered by the lenders, ranges from a minimum of five years to about a maximum of about thirty years. The tenure offered varies from lenders to lenders. As an applicant you should be opting for a shorter tenure which decreases the amount of interest to be paid. The equated monthly installments are higher in this regard but eventually, it will help in the reduction of the overall cost of the home loan.
4. Processing Fees
Processing fees as indicated by the name is the fees charged by the lender to the borrower for the processing of the loan so applied. Different financial institutions charge different processing fees and hence the applicants should compare the fees charged by various lenders and finally select the one that charges the lowest amount.
5. EMI or Equated Monthly Installments
Equated monthly installments or EMI is the amount to be paid monthly by the borrower towards the repayment of the loan taken. This amount depends on the borrower to a great extent. The down payment made at the time of buying the home matters a lot in deciding the EMI amount. The greater the down payment the lesser is the stress of the outstanding amount. The loan amount availed, rate of interest and the tenure also play an important role in deciding the EMI amount. The borrowers should make sure that the EMI is as per the total monthly income. It is recommended that the EMI amount should not be exceeding more than about 45 percent of the total income.
6. Documents Required for Home Loan
Before applying for a home loan, it is extremely important to go through the terms and conditions of the lender in detail. It should be made a point to read through each of the minute details before signing on the home loan agreement. Also, it is vital to understand the documents required for availing the home loan, all of which should be kept handy to readily increase the chances of loan approval.
6. Down Payment
Down payment refers to the amount paid at the time of availing the home loan. The amount of down payment again varies with different lenders. Usually, the borrower needs to pay about ten to fifteen percent of the total amount of home loan to be availed. The rest of the amount is then converted into EMIs which is required to be paid on a monthly basis. Now, if the borrower has surplus cash in hand, it would be a very good idea to increase the down payment which plays a crucial role in saving on the interest to be paid in the time to come.
7. Other Charges
The borrower should be absolutely clear about any other additional charges that needs of be paid at the time of availing the loan or at the time of repaying. It is ideal to go for a clear discussion with the lender while applying for the home loan. A prior discussion would prevent any kinds of harassment or hassles in the future.
8. Pre Payment Charges
Pre payment refers to the amount paid in excess of the stipulated EMIs. This can be done whenever any surplus cash in hand is available with the borrower. But before availing the home loan, the borrower should ensure that if there is any pre payment penalty charged. Usually the lenders do not charge any penalty where the borrowers can freely make partial payment towards the loan amount availed whenever cash is available.
9. Rules for Foreclosure
Foreclosure of the home loan refers to the closing of the loan before the fixed tenure by making the complete repayment at once. The earlier the complete repayment is done, the less is the interest to be paid. The lenders generally charge a foreclosure charge which the borrower needs to get cleared at the time of availing the home loan. All other rules and regulations regarding foreclosure should be properly understood while applying for a home loan.
Keeping all the above mentioned things in mind while applying for home loan would make sure that you select the most appropriate home loan provider that suits you the best in almost all aspects. You can also talk to our in-house home loan consultant, if you’re planning on purchasing a property with SPR Highliving.