10 Things you must know before you avail a home loan
Real estate is often the most rewarding investment option in India. Whether you buy a property for investment or wish to live in it, a home or housing loan can provide you with the money required to finance the purchase.
The current home loan interest rates might give you reasons enough to dive into the world of real estate. But hold! You may need a quick look through the top-10 things mentioned below before applying for a housing loan.
The Top-10 Things You Should Know Before Applying for a Home Loan
1. Eligibility Criteria
The first thing you need to know of is the housing loan eligibility criteria.
Housing loan eligibility and interest rate depend on many factors, including age, citizenship, credit score, income, educational qualification, nature of income, property status, etc. The eligibility often differs from lender to lender.
2. Credit Score
The borrower’s credit score is one of the most crucial parameters determining the current home loan interest rates. A credit score above 750 is treated as the best score. Hence, before applying for a housing loan, you should improve your credit score and take it above 750.
3. Type of Interest Rate
Housing loans come in fixed or floating interest rates. The fixed rate remains uniform throughout the loan term.
In contrast, the floating rate may change every three months. When you reclose a fixed rate housing loan, you may have to pay some penalty.
However, you can reclose a floating rate loan without any prepayment penalty.
4. Repayment Tenure
The loan term affects the approval and interest rate. If you choose a short repayment term, the interest burden will be less. If you choose a long-term loan, the EMI amount will be more pocket-friendly. If your income is high, you can select a short repayment term without worrying about approval.
5. Secure a Pre-Approval
Applying for a housing loan pre-approval increases the chances of loan approval. It also helps you select a property within your budget. When you have a pre-approved loan, purchasing a property becomes seamless.
6. Loan Amount and Down payment
Lenders generally provide a housing loan amount of up to 90% of the property value. You need to pay a minimum of 10% as the down payment. Some borrowers increase the down payment amount to reduce their financial burden and bring down the EMI.
7. Fees and Charges
Lenders often hide the fees while informing you about the loan costs. When you apply for a housing loan, you may need to pay various charges, such as processing fee, administrative charges, stamp duty, etc. You must inquire about these charges before signing on the dotted line.
Fortunately, you do not need to submit too many documents while applying for a housing loan. Keep age and residence proof, income proof, educational degree certificates, and property documents ready to zoom past the approval process.
Lenders like PNB Housing offer home loan insurance to take care of unforeseen circumstances. When you ensure a housing loan, the insurer assumes the responsibility of loan repayment if your income tumbles or stops.
10. Foreclosure Rules
It is safe to inquire about the foreclosure norms before applying for a housing loan. Some lenders charge a 2% foreclosure penalty, while others waive off the penalty for eligible borrowers.
Knowing about the ten things mentioned in this article can help you reduce the current applicable home loan interest rates. Read all terms carefully before applying for the loan.
- 1 10 Things you must know before you avail a home loan
- 2 The Top-10 Things You Should Know Before Applying for a Home Loan
- 3 1. Eligibility Criteria
- 4 2. Credit Score
- 5 3. Type of Interest Rate
- 6 4. Repayment Tenure
- 7 5. Secure a Pre-Approval
- 8 6. Loan Amount and Down payment
- 9 7. Fees and Charges
- 10 8. Documents
- 11 9. Insurance
- 12 10. Foreclosure Rules
- 13 Conclusion