Table of Content:
- The rate of interest
- Loan Amount
- Loan Tenure
- Down Payment
- Processing Fee
- Pre-approved home loan
- Examine your credit score
Do you know the easiest way to get your hands on your dream home? The easiest and safest option that you can take to buy your dream home sooner than ever is by taking a home loan. Buying a home is not only a financial decision but also an emotional one. Once you get the home loan, you will know you are one step closer to achieving your dream home than yesterday. Nevertheless, this picture might look exciting and pretty. Still, there are certain key factors that you need to consider when taking a home loan so that they simplify your home loan application and repayment process.
1. The rate of interest
The rate of interest plays a vital role in the decision-making process as to whether to avail of a loan or not and which lender will be best suited. So, before you finalize your lender, research and gather as much information as much as possible; once you are done with it, start comparing the interest rates offered by banks and house finance companies.
2. Loan Amount
The interest rate varies for the loan amount up to 30 lakhs, above 30 lakhs, 75 lakhs, and above 75 lakhs. You must choose a loan payment amount based on what you think you can comfortably repay. It is advised that even if your eligibility matches for a large amount but you also know that you might have trouble repaying, then don't opt for that loan. If you become a defaulter or delay in repaying the loan, it will negatively impact your credit score and affect your future loan eligibility. So, act smart and don’t jump on the very first chance you get on a huge amount, be proactive, and work on the amount you think you can easily repay!
3. Loan Tenure
Depending on your eligibility, you can avail of a home loan for a longer period. You can lower the monthly repayment amount if you successfully receive a longer loan tenure. Nevertheless, decreasing the monthly repayment amount can increase your total interest. So it would be best if you choose your loan tenure wisely, i.e., one that will make your loan repayment process easy and safeguard you from high-interest rates.
4. Down Payment
Let's understand down payment with the help of an example: Suppose you applied for a home loan of Rs 80 lakhs and, based on your eligibility, the bank approved a loan of Rs 60 lakhs. In this scenario, you will have to pay Rs 20 lakhs from your pocket, making it a down payment. Without disrupting your budget, you should pay as much down payment as possible. The basic idea behind this is that the lowered loan amount will lead to a lower interest payment.
5. Processing Fee
Most processing fees are charged based on a fixed percentage of the home loan amount. In order to process the loan application, the lender charges processing fees, mostly between 0.5% and 1% of the loan amount.
6. Pre-approved home loan
Let's say that you have not yet finalized the property that suits you the best, but it would be advisable to get your home loan pre-approved. Doing so will give you a better idea of your loan budget, and in this form, you will be able to negotiate with the builders more efficiently.
7. Examine your credit score
For pre-approved and regular home loans, banks and house finance companies will ask for documents like KYC, income certificates, and property documents. But before submitting these documents to the concerned authorities, you need to check your credit score. Therefore, it would be best if your credit score shows an above-average score before applying for a home loan. By having this good credit score, there are more chances of attaining loan approval soon.
Buying a home involves several steps, of which the one step that requires your undivided attention and patience is when you go for a home loan. Before you take a home loan, wait and consider your future condition- what will happen if you take a huge loan and cannot pay it in the future? Yeah! It happens when people make a decision without giving it a thought. If you, too, are someone who gets into this trap and cannot pay your monthly instalments, then your lender will take legal action against you, and in some cases, they tend to sell your property to recover the dues. So gather information, talk to your lender, and negotiate home loan terms.
Also Read: Tax Implications on Home Buying