Everyone wants to save enough money to buy a home someday. But only a few manage to buy their dream house with their savings. Most people borrow money from banks to fulfil their dream of owning a house.
A home loan is the quickest and easiest way to get a home without spending your savings. In a home loan, you only pay monthly instalments, called EMI, until the term ends.
Here are a few tips that every beginner must keep in mind when applying for a home loan.
1. Borrow What You Can pay
As a rule, the equated monthly instalments for a home loan should not be more than 10% of your monthly income. If the EMI takes a major portion of your monthly income, you will face difficulty managing other financial goals. After all, loan repayment is not your only expense.
Before you apply for a home loan, calculate the EMI and compare it with your income. Then, choose an affordable housing loan that costs a reasonable monthly payment with low interest.
2. Shop for the Best Rates
Not comparing the rates is a common mistake of borrowers when applying for a home loan. Banks offer home loans at different rates. In fact, the home loan process and the total cost of getting a loan are never the same. It varies depending on the bank you choose.
Research well and always compare the home loan interest rate before getting a loan. You can also switch your bank if you find a better and cheaper option.
3. Get the Documents Ready
Earlier, banks would take several weeks to approve the loan applications. That time is long gone! The technology has made it possible for applicants to apply for a home loan online and get the amount within a week. The only condition is that you must submit the required home loan documents as required. The documents needed for this loan are almost the same. Here’s what you will need:
- ID proof
- Address proof
- Age proof
- Income proof
- Property documents
The bank can ask for additional documents. So, keep everything ready in advance to prevent any delays in the disbursal.
4. Never Miss the Payment
Delayed loan payments can damage your credit score (a 3-digit numerical value that shows your credibility and debt payment history). It’s hard to get loans with a poor credit score. So, to avoid that, ensure timely payments. Banks also charge a late payment penalty and a high interest for missed payments.
5. Check the Upfront Payment Requirements
The upfront payment is the amount you pay before you get the loan. It includes the down payment (a small part of the property’s value) and processing fee. Banks can charge a processing fee of up to 3% of the loan amount. The down payment can be 10-30 per cent of the value of your property. Before applying for a loan, check whether you can meet the upfront payment requirements.