A home loan is an effective credit option that helps borrowers realize their dream of owning a house. It extends adequate financial assistance, preventing individuals from straining their finances. Moreover, with the easy repayment structure and nominal interest, a home loan has become an even more feasible option for borrowers to reach out to.
However, borrowers should proceed to avail of home loans only after considering the nitty-gritty of this credit option. It is a massive financial decision that will prove counterproductive if not planned well.
Know the 10 things to know before availing of a home loan
Borrowers should take the following factors into consideration while availing of a home loan:
1. Compare lenders:
There are several lending institutions offering home loans. Therefore, borrowers should invest time in searching for the right lender, focussing mainly on parameters like down payment, EMIs, loan tenor, and interest rate that formulate the loan.
2. Meeting home loan eligibility criteria:
Before borrowers avail of a home loan, they should meet the following eligibility norms set by the lender.
- Applicants must be Indian.
- Salaried individuals must belong to the age group of 23 to 62 years.
- Self-employed individuals should fall in the age bracket of 25 to 70 years.
- Salaried applicants must have a work experience of 3 years.
- Self-employed individuals must have work experience of at least 5 years.
In this context, borrowers can use a home loan eligibility calculator to determine their eligibility for receiving sanctions for a higher loan amount.
3. Keep documents ready:
Besides meeting the eligibility criteria, borrowers should keep the following documents in order to avail of a home loan.
- KYC papers
- Employee ID
- Property documents
- Salary slips
- Bank account statements
4. Access loan amount:
Borrowers can avail of a loan amount equivalent to 75% to 90% of the property’s current worth. Moreover, individuals can consider a co-applicant to receive a sanction for a higher loan amount.
5. Settle for affordable Interest rate:
The affordability of borrowing depends on the home loan interest rate. Hence, borrowers must take time and select a lender offering a nominal interest rate.
6. Opt for a suitable loan tenor:
Borrowers should choose the repayment tenor wisely as it significantly impacts the EMI payouts. In this context, borrowers should know how to trim the home loan tenure and lower loan expenditure.
7. Look for hidden costs:
Additional costs like processing fees, administrative charges, prepayment penalty, etc., must be considered by borrowers as it adds to the cost of borrowing.
8. Check credit score:
CIBIL score suggests the creditworthiness of borrowers. A CIBIL score of 685 and above is ideal; it helps one fetch a better interest rate.
9. Consider the EMI amount:
Borrowers should aim at affordability, hence choosing an EMI amount they can afford to pay while managing other financial liabilities. This is why borrowers should use a home loan calculator and reap the benefits of calculating EMIs before taking a home loan.
10. Know the application procedure:
It is equally important for borrowers to know the following home loan process.
Step 1: Visit the preferred lender’s official website and select home loan from the product page.
Step 2: Select the ‘Apply online’ tab and get redirected to the online application form.
Step 3: Verify the account with OTP and fill out the form with the necessary details.
Step 4: Enter the loan amount and tenor and finally submit the application form
Furthermore, borrowers should look for pre-approved offers extended by leading financial institutions. These offers are available on financial products like home loans, loans against property, etc., ensuring an expedited loan application process. Intending individuals can check their pre-approved offers by submitting their names and contact details.
To sum up, a home loan acts as a saving grace, helping one own their dream residential space. However, before proceeding to avail of a home loan and make the borrowing functional, individuals must have a well-rounded idea regarding the intricacies of the credit option.