Buying a home is a sizeable purchase and most of us have to rely on financial assistance. A home loan or Applying for a Home Loan is the preferred choice when it comes to buying one’s dream home, as it lets you buy the property of your choice even when you do not have the funds available in lumpsum.
However, Applying for a Home Loan is a long-term commitment that can span across nearly 30 years, and an unmindful approach can cost you money and financial security. Choosing the right lender with favorable loan terms becomes crucial for a pleasant home loan journey. In this article, we talk about the 7 aspects to consider before making your home loan application.
Table of Contents
1. Credit Score
A healthy credit score, preferably above 750, allows you to avail of a loan on favorable terms. You should focus on clearing all pending dues and look for ways to maintain a healthy credit profile. Avoid multiple loan applications as every loan inquiry reported to credit agencies is considered a hard inquiry, which can hamper your credit score. Also, too many inquiries project you as a credit hungry borrower.
2. Interest Rate
Interest rates play a decisive role in your home buying journey. Considering the prolonged nature of home loans, a slight change in the interest rate can significantly affect your EMI outgo. It is always a good idea to compare home loan interest rates offered by various lenders. This gives you a holistic picture of the industry standards, thus helping you choose the lender of your choice.
3. Maximum Loan Amount
The size of the approved loan amount is subject to multiple parameters, such as the value of your property, your income, age, and credit score. Before extending credit, lenders also consider your existing obligations to evaluate your repayment capacity. Therefore, it is necessary to account for these factors before you determine your maximum loan amount.
4. Personal Savings
Large EMIs, which eat up a major chunk of your monthly earnings, leave no scope for other expenses. Savings, in such cases, help a lot and keep financial stress at bay. As a result, before you sign up for a home loan, you should take stock of your financial status and savings.
5. Foreclosure Norms
You can foreclose your home loan if you have the required amount at any point during the tenor. Foreclosure helps you close your home loan before time and save on a considerable portion of your interest outgo.
However, note that fixed interest rate home loans attract charges which vary from lender to lender. On the other hand, no penalty or foreclosure charges are levied on floating interest rate home loans for individual borrowers.
6. Associated Charges
There are other charges associated with a home loan, such as administration fees and processing charges. Hence, a borrower should go through all the additional charges before opting for any lender to realistically account for their total cost of borrowing a home loan.
7. Loan Agreement
A home loan is a decision that impacts your financial independence and your future goals. It is vital to know the terms and conditions laid down in the agreement, so you are aware of everything that is expected of you in terms of loan obligations. It is important to align with your lender’s plan to avoid any critical financial discrepancies in the future.
Once you have gone through this checklist, you can use an online home loan calculator to understand the calculations by inputting variables, such as your desired tenor and loan amount, and proceed to make your loan application today.
