Planning to buy a home? You are probably already imagining the furniture you will buy, where you will have the TV, and enjoying the many delights of setting up a home of your own. But owning a home also comes with its own set of responsibilities like pay your EMIs every month without fail, and planning your budget every month to accommodate your EMIs.
When you actually sit down to research home loans you will find that you are bombarded by an array of very tempting offers being advertised. The market is flooded with home loan options and it can quite overwhelming to try and compare the various features and benefits in offer.
There are several online resources today that could help you compare the loan offers but it could be a boon as well as a bane as the overwhelming number of options could well result in a mind freeze! If you are seriously considering buying your very dream home, then here are some tips to keep in mind on what to look for while loan comparison.
What to consider
Hunt for the lowest interest rates: A home loan is a considerable long term commitment, with tenures that can stretch to even 20 years or more. Of course, the interest rate offered to you depends on a variety of factors like your credit score or your existing relationship with your bank. However, it still pays to do research on who offers the lowest interest rates. Even a 0.50% reduction in the interest rate could mean substantial savings every month for many years.
Fees and charges matter: Be aware of the various extra costs associated with a home loan. There are several fees and charges involved like the processing fee, which is non-refundable, and the documentation fee. Other charges to look out for are the part pre-payment charges, payment mode swapping charges, etc. These kind of charges could substantially add to your loan so check that the terms suit your needs.
Comb through your mailbox for the best offers: If you already have an existing relationship with your bank, chances are you might have offers waiting for you in your email inbox. Deals in your mailbox may offer better terms than general offers sent to a wider set of applicants online.
Here are some do’s and don’ts to keep in mind when considering applying for a home loan:
Do focus on improving your credit score. It is absolutely necessary to do this if you have a bad score. It is advisable to have a credit score of at least 750 or above when applying for a loan. You might be able to get a home loan with a lower credit score but be prepared for more unfavourable loan terms like a higher interest rate or smaller loan amount.
Obtain a copy of your credit report well in advance of applying so that you have enough time to improve your score, if required. Check for any errors like wrong personal details or incorrect loan status that could be unnecessarily dragging down your score.
Do pay off your dues consistently on time and in full. You will see your credit score rise.
Don’t make multiple applications for loans. This rings an alarm bell for lenders who think that you are desperate for credit and need to apply to various sources. Multiple simultaneous applications will decrease your credit score. Take your time researching for the best home loan rates and only apply for the one which suits your needs and where you have the best chance of being approved.
Don't use just one online comparison site that lists out various home loan offers. There are some sites that only list the loan lenders who advertise with them. This means only a select number of loan will be featured, which is a huge negative since you miss out on the pool of potentially better home loan offers. Use multiple resources to do your research instead.
Don’t and absolutely don’t hurry on a home loan decision since your choice can have consequences that will impact you for many years to come.
The best way of comparing and choosing a home loan provider is to do a thorough research on the various offers available in the market and decide which one is most suitable for you in terms of interest rates, fees, and other features. Clarify any doubt or questions you have with the potential lenders and make sure you are clear about what your financial commitment will be. You can use online tools like a home loan EMI calculator to calculate the cost of each loan offer.
Comparing home loans and choosing the best offer suited can be a difficult job, given the number of options available. If you think you need help with choosing the right home loan suited to your particular credit profile and needs, then CreditMantri can guide you through the entire process and match you with the best offer that you are qualified for.