If you’ve decided to opt for a house loan, you’re one step closer to owning your dream home.
However, applying for a home loan requires proper documentation and specific eligibility criteria. Not to mention, the ever-increasing prices of real estate can cause an increased financial burden on you till the loan is cleared.
To avoid the application process hassle and be aware of your loan EMI affordability, there are certain things you need to consider.
Do’s when applying for a home loan
Here’s what you should do to make your loan application easier.
Aim for a Good Credit Score
Sometimes, a good credit rating gives lenders the push to process your loan application.
Your credit score reflects your credit history, repayment patterns, and if you’ve made any defaults. Your credit card debts and other existing liabilities are also in the report.
A credit rating of 750 is considered good. To maintain this credit rating, make sure to pay all your credit card bills on time, and if you have any existing loans, clear them before applying for a home loan.
Compare Loan Schemes
To get a home loan that gives you your dream home without creating an unnecessary financial burden, choose a home loan you can afford. Check lender websites for loan offers, interest rates, and tenure.
You can use a home loan calculator to get estimated EMIs based on the loan amount, tenure, and the home loan interest rate.
Fill Your Application Correctly
If there are any errors or mismatches on your application, it will stall your loan application. Make sure you fill the application with all the correct details and cross-check all fields to catch any mistakes.
If there’s any incorrect or false information on the application, it can lead to a delay or potential rejection of your application.
Co-borrow with Your Spouse
If you have another earning member in your family, apply for a joint loan. You can then apply for a higher loan amount and split the repayment burden with someone else.
A joint home loan also means a better chance of loan approval, especially if the co-applicant has a good credit score.
Make Higher Down Payment
If you make a good down payment on your home loan, it reduces the amount you need to borrow.
Make sure you can pay at least 10% of the loan as a down payment. Home loans are usually sanctioned at 85% of the property value, and you need to pay the rest yourself.
If you already have decent savings for a down payment, you can pay more than the ideal amount, thus reducing your loan burden and the lender’s risk.
Don’ts when applying for a home loan
Here’s what you should do to avoid reducing delays in your home loan application.
Avoid Long Tenure Loan
We all understand that loan tenure means lesser EMIs, but the higher your tenure, the more interest you have to pay.
Home loans can be availed for as long as 30 years, but this means more interest payments. Instead, if you take the loan for a shorter tenure, you’ll pay more in EMI, but more payments are made towards your principal than interest.
Have a Stable Job
If lenders see that you have a stable job for a while, it puts you in a favourable light. Your income and employment status are important considerations in your home loan application.
So, don’t change your job before applying for a home loan.
Read the Fine Print
A lot of the loan terms are in the fine print, so make sure to read each aspect of the loan offer before you finalize anything.
This way, you’re fully aware of add-on feeds like prepayment charges and don’t get any surprises later.
Make a Major Purchase
Avoid making any other major purchase around the time you are applying for a home loan. If you already have a heavy financial burden, lenders might hesitate to grant your loan if they cannot be assured of repayment.
Before getting a home loan, your goal should be to minimize all your existing debts and clear off any pending dues for a favourable credit report.
Your home loan application doesn’t have to be complicated if you prepare all the necessary documents and other requirements beforehand. Homebuyers can also avail of various add-on services to reduce the home loan interest rate and the overall loan burden.
Understand the home loan process to make the best decisions. Get all the information on choosing a lender and applying for a home loan, and more on understanding your monthly installments.