Introduction
Buying a home is one of the biggest financial decisions most people make in their life.
So, if you plan to buy a home of your own preference, opt for a home loan. However, getting a home loan is more challenging than it may seem.
Some people need to be made aware of all the formalities required to get approved for a home loan.
If you are applying for a home loan for the first time, you need to consider a few things before applying.
In this article, you will discover top tips to consider before applying for a home loan for rental properties.
Top Important Considerations To Make Before Taking A Home Loan
Below-mentioned are some of the most common things you should consider before availing yourself of a home loan.
1. Credit Score
A credit score is one of the most important and essential factors that banks consider before offering any loan to their customers.
So, any individual who desires to take advantage of a home loan should maintain a good credit score. It is essential to apply for any type of loan within the banking sector.
Therefore, it is vital to have a CIBL score of more than 750 for a higher home loan. Similarly, this will help you avail yourself of a home loan at a lower interest rate.
Thus, maintaining a good credit score is relatively easy. You can do it by making on-time payments on your credit cards and existing loans.
2. Home Loan Tenure
Every individual who desires to avail themselves of a home loan needs to decide on home loan tenure and then apply for one.
Therefore, your home loan’s EMI directly depends on the home loan tenure. In addition, the banks prefer home loan applicants with shorter repayment periods.
So, if you opt for a shorter repayment option, it is beneficial for you as it decreases the home loan interest burden on your EMIs. Similarly, with shorter tenure, the monthly installment is also minimized.
Hence, home loans with shorter repayment periods will help to decrease the overall home loan cost.
3. Interest Rate
Every individual should consider the home loan interest rates of different banks and other financial institutions.
So, you must compare different lenders for low interest rates if you want a home loan.
However, before that, you need to be aware of different types of interest rates. There are two types of interest rates: fixed and floating.
Under a fixed home loan interest rate, the monthly installment does not vary over the loan tenure. Floating interest rates charge monthly EMIs, and the interest varies from time to time, which can help you save interest money.
To determine the right type of loan, visit the link and decide on the tenure and interest rate.
4. Process Fee
The lender might be charging you a processing fee for your loan application.
Therefore, the processing fee depends on the loan amount. This is because the banking companies charge processing fees as a fixed percentage of the loan amount.
Thus, the processing fee for a home loan is generally between 0.5% to 1% of the loan amount.
Moreover, some lenders might offer a flat processing charge for the loan amount. Thereafter, the home loan amounts are usually higher. Even a small difference in the percentage can make a huge difference.
5. Charges Not Included
In addition to the EMIs, banks might charge borrowers service fees or administrative processing fees when they apply for a loan.
However, you need to discuss this with the lender before you can apply for a loan.
So, check whether the charges are one-time or monthly. If they are monthly, you must consider them with your EMIs, and your budget must be arranged accordingly.
6. Select Appropriate EMIs
An easy and convenient way to opt for an appropriate EMI is to look for equated monthly installments.
Here, the equated monthly installment amount depends on your choice and opinion. Similarly, the EMI amount depends on the down payments you make when buying your home.
So, the more down payment you make, the less outstanding amount remains.
Thus, we recommend that you ensure that the EMI amount does not exceed more than 45% of your total income. This will help you calculate the EMI using the home loan EMI calculator.
7. Keep CIBL Score Up To Date
Maintaining a CIBL credit score when applying for this type of loan is important.
Therefore, regulation pays off, whether it is cyclical credit card payments or whether it is a loa payback.
If you find that your CIBL score is more than 751, you can get an even better interest rate on your home loan.
Along with that, it accompanies a much larger likelihood of faster disbursal and processing.
8. Additional Charges
Apart from the EMIs, banks might levy other charges, services, and processing charges on the borrowers when they apply for the loan.
So, ensure that you consult with the lender first and then apply for the loan.
In addition, we suggest you check whether they are one-time charges or just monthly. If they are charging monthly, then they need to be taken into deliberation along with the loan amount. This will help you avail yourself of the monthly finances planned accordingly.
9. Know The Foreclosure Norms
It is necessary that you are aware of the RBI norms.
Therefore, foreclosing your home loan by replying to the outstanding amount is less than the time that has been committed. It also saves you time when making payments as well as other additional expenses.
So, the sooner the loan repayment is completed, the higher your credit score will be.
Summing Up
Since buying a home is an emotional and financial decision, you should consider all the above-mentioned factors and choose the right type of loan that will not burden you later.
Furthermore, it is advisable to conduct some research before choosing a lender.
Moreover, a quick Google search might lead you to better offers on process fees, interest charges, or other fees.
Thus, you need to make sure to consult your primary banker along with what they can offer you best.
So, avail yourself of the best kind of home loan product for your needs.
