Imagine this - After running from locality to locality, making a countless number of checklists of your needs and requirements, you have finally found your dream home and are just one step away from purchasing it and becoming the owner of the home you have always wanted. Even better, it ticks all criteria on your list and offers extra amenities too!
If you have reached this stage, it is time for you to choose a bank that will give you the best home loan to complete your home buying journey. If you are yet to find the perfect home, even better. There will come a time when you would need to seek assistance for a home loan from a reputed bank too.
Either way, making the right choice of deciding on a bank that provides you with benefits and low-interest rates falls upon you. Real estate market predictions for the year 2022 have made all of us realize that now might just be the best time to invest in properties. Did you know that interest rates for properties are currently at an all-time low? This has opened up a plethora of opportunities for both new home buyers and existing ones.
No matter how much time you spend on research, you are never sure if it is enough to cover every aspect of buying a property. Let us help you with the home loan part of it. To begin with, make a note of the documents that are required by banks in India. Create a list if need be, and when the time comes, keep them ready beforehand.
Documents Required to Get a Home Loan Approval by Banks
Processing your request for a home loan is not an easy task for the banks either. They have to go through all the documents that you have submitted, not only verifying but also cross-checking every detail. The good news is that most banks in India require the same documents to be submitted, hence saving time.
- Identity Proof: driving license, aadhar card, ration card, voter ID card, utility bills.
- Income Proof: PAN card, certification of employment, bank account statement, income tax returns
- Address Proof: driving license, aadhar card, ration card, utility bills, passport
- Property Related Documents: sale deed, property tax payment receipts, agreement of sale, non-encumbrance certificate, builder-buyer agreement
Almost every bank across India offers home loan schemes to its customers. However, the best banks for home loans in 2022 are just a few.
We have done all the groundwork for you. All you have to keep in mind is to make sure you choose wisely and consider all factors. The priorities and requirements of home buyers vary from person to person. Given below is a detailed account of the different elements you need to reflect upon before deciding the right bank for your home loan.
We also want to inform you that according to the framework provided by the Reserve Bank of India, no banks or financial institutions are allowed to give any customer a loan of full 100%.
Important Factors to Consider before Choosing the Right Bank for Your Home Loan
Rate of Interest (ROI)
This is one reason why you need to do thorough research before deciding on a bank. You need to weigh all your options carefully and choose the bank that provides the lowest rate of interest. Your research does not end here. You need to know if you want to opt for fixed ROI or floating ROI. Not all banks give you the option of choosing.
Let us make this decision easy for you. You can choose right this minute which type of ROI you want to opt for. Choose a fixed rate of interest if the interest rates are rising, and choose floating ROI if the interest rates are falling.
Revisions in Loan Rate
The Reserve Bank of India (RBI) often changes the rate of interest that is to be applied on a home loan. While sometimes it increases the prices, sometimes there is a dip too. Floating ROI comes into the picture again. If you have applied for the floating rate of interest, you need to make sure that the bank makes the necessary changes to the ROI as soon as a statement is issued from the RBI.
Sometimes, even the most reputed banks end up spending too much time processing and providing you with your home loan. Figure out which banks have excellent customer service reviews, and then make your decision. No home buyer wants to wait around more than required to complete one of the final steps of their home buying journey.
You need to create a bond with your chosen bank where both you and the bank trust one another. Now that you have taken a home loan, you are most probably going to be associated with the bank for the long term. Market reputation of the bank is also important since it determines the number of satisfied customers it has catered to in the past. If ever, your bank commits a wrongdoing and goes out of business, it will affect you and your plans as well. Search around the public domain and figure out where your lender stands in terms of finances.
Home Loan Documents
Every bank will give you some documents that state the terms and conditions of the financial institution. No matter how much time you spend, you need to go through every word of the document before you go ahead and sign it. Blindly trusting the bank will do you no good. You may end up paying extra fees, charges, and penalties in the future just because you made the small mistake of not going through the document before signing. Better safe than sorry!
In India, taking a home loan means that you also have to make an advance payment for the property that you have decided to buy. This advance payment is known as a down payment. Usually, you are required to pay a minimum of 15%-20% of the total amount of the property. The more down payment you pay, the easier it is for you to repay the home loan in the future. If possible, increase the down payment that you are paying so that banks have no option but to charge you a low rate of interest.
This is mandatory for anyone who is seeking a home loan. You are required to pay the processing fee once your request for a home loan has been approved by the bank. Try and find a bank that asks for a low processing fee. If not, then find one where you can negotiate and get them to slightly reduce it.
Apart from the processing fee and the home loan EMIs, the bank should ideally not ask you to pay any additional charges. If such a situation arises, remember to ask them what these charges are for and why you are required to pay them.
Pre Payment Penalty
While this aspect of home loans was functional before, it is not anymore. The new guidelines provided by the RBI clearly mention that no bank is permitted to charge a prepayment penalty from their customers. This has turned out to be an advantage for home buyers. After you have received your home loan, you can now make a partial payment whenever you have the money and the means.
Are the terms getting too technical for you? Wait, let us explain. Foreclosure is when you are in the position to pay the entire amount of your home loan before the decided tenure ends. This is usually a good thing since you are charged less interest if you pay sooner than expected. However, most banks end up charging a penalty if you pay before your tenure. Most customers even fail to notice that they have been charged an extra fee. If you want to avoid this, choose the option of floating interest rate. This option binds the bank to not charge you any penalty whatsoever.
Buying a property is an investment that lasts a lifetime. Whether you plan to own it for life, or you want to resell it in the future - it is the owner (you!) that ultimately enjoys the profits. Your future gains might turn into losses if you rush the process.
Also, consider your credit score before approaching a bank for a home loan. You can leverage a good credit score and get some waivers off of the fee. Remember that financial institutions today are more than willing to help home buyers with their home loans, and the government is encouraging these institutions to ensure a seamless process for their customers.
Choose a bank that fulfills all your requirements, and do not hesitate to take more time than needed to make your decision.
After all, it is your very own dream home we are talking about here!