8 Home Loan Tips You Should Consider
Buying a home is a dream come true for many. This is a crucial decision in someone’s life financially and emotionally. Usually, a majority of people buying a house take a home loan. To make your home loan decision simple and less stressful, keep these 5 important pointers in mind before applying for a home loan. Read on!
Tips to Keep in Mind Before Applying for a Home Loan
1. Compare Interest Rates
Different banks and NBFCs (Non-Banking Financial Companies) offer competitive interest rates on home loans. Check and compare to find the lender which offers you the home loan at the lowest possible interest rate.
The same applicant could be offered two different interest rates by two different financers.
Also, note whether the interest rate is being offered at a fixed interest rate or floating interest rate. A fixed interest rate home loan would nearly mean the same EMI for the entire loan tenure. For floating interest rate home loans, EMIs could increase and decrease depending on the market condition.
Check Your Home Loan EMI
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Rate of Interest (P.a)
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Loan Tenure (Years)
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Monthly EMI
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Total Interest
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2. Compare Other Options
It is essential to compare loans from various lenders before applying for a home loan. You can get a lot of information from the terms and conditions offered by each lender.
Moreover, by comparing options rather than just sticking with one home loan lender, you can make more informed choices. You can find valuable information like which home lenders offer lower interests or charge lower processing fees and other associated charges with a little bit of research.
3. Check Fees and Charges
Interest rate is not the only cost associated with a home loan. Lenders earn from other sorts of charges as well like the processing charge, prepayment charge, etc. Institutions with extremely high non-interest charges may defeat the purpose of savings even if they offer affordable interest rates.
One must always have an open conversation with the lender to understand all the associated and hidden charges linked to the home loan, as this will help you to find the best possible deal for the loan.
4. Find the Right Type of Loan
While applying for a home loan, you need to keep in mind that not all types of loans will work for you. For example, some of your acquaintances may prefer fixed-rate loans, and they may even suggest you apply for such a loan. However, fixed-rate loans may not be the perfect option for you.
The interest rates for various types of home loans depend on market conditions and moves in relation to RBI’s base rate. So, it is imperative that you choose a home loan that fits perfectly with your financial situation and not just based on other people’s recommendations.
5. Your Credit Score
This is a measure to check your creditworthiness. This tells the lender about how safe it is to lend money to you. A credit score of 750 and above could get you the best possible interest rate from any lender out there.
Given the importance of this factor, you should be aware of your credit score before applying for a home loan. Good credit scores may give you leverage for a good bargain on interest rates.
You may learn your credit score for free on many platforms today. Credit rating agency CIBIL offers an annual free credit report. Here’s everything you need to know about CIBIL score.
6. Understand the Loan Agreement
A Loan Agreement is a document that governs the terms and conditions of a particular loan given to the applicant by a financial institution. The agreement is meant to define the terms for repayment, interest rates, disbursal, default, etc.
Individuals need to properly read through the document to understand the various clauses. Some of the common clauses that one can find in most home loan agreements are:
- Prepayment and foreclosure clauses
- Notification clause
- Additional security cover
- Reset and force majeure clauses
- Amendments to the home loan agreement
As a home loan applicant, having proper knowledge of the loan agreement will help you approach the home loan lender of your choice.
7. Downpayment
Usually, a lender will only process a home loan for up to 90% of the property value. The rest has to be paid upfront from your own pockets. This is called ‘downpayment’.
Paying more down payment reduces the burden of piling interests. It also increases the chances of loan approval, as it gives the lender more confidence over your application.
Hence pay a good amount of downpayment to reduce your liability and increase your chances of securing a loan.
8. Documents Required
Your financial ability is gauged by the lenders in order to understand how reliable you would be for loan approval. The lending institution will ask for documents like Income Tax returns for the previous few years, bank account statements, GST return(if you’re a businessperson), etc.
If you are married, then you may also file a joint application. Your spouse’s financial ability along with you could add up to the security the bank is looking for.
Documents to Keep Ready While Applying for a Home Loan
Keeping all the necessary documents ready will help you with easier loan processing and the best possible deal. Documents that you should keep handy while applying for a home loan are:
- ID proof(Aadhaar, Voter ID card, etc.)
- PAN Card
- Bank account statement
- ITR for the last few years
- Allotment letter by the builder
However, with Navi, you are not required to furnish tons of documents. All you need is your PAN/Aadhaar card and bank statements to get your loan approved. Enjoy zero paperwork, 100% paperless loan application process and attractive interest rates. Download the Navi app today.
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Final Word
Buying your own home is a dream come true. But if you are thinking of taking a house loan, it is best to do your research before taking the leap. Keep these 5 points in mind and you will be able to get a house loan approved at a competitive interest rate.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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