A home loan is a line of credit used to finance your home purchase. Here are some top tips for getting a home loan.
Check your Credit Score
Keep track of your credit score. To obtain a home loan with better interest rates and lower EMIs, you should have a credit score of at least 650+. A good credit score enables you to get a home loan from a reputed lender. If your credit score is low, take steps to improve it before you apply for a home loan.
Be Thorough In Your Research On Home Loan Options
Home loans have a longer tenure than all other loans, so it is necessary to know all the essential things about them before, during, and after the home loan application. Nowadays, with the internet, you have the luxury of researching various home loan options in the market. Make sure to research the crucial factors of EMIS, down payments, home loan interest rates, loan terms, and loan durations. You will then be able to choose the lender who makes the most suitable offer for you.
Determine The Right Loan Amount
It is essential for borrowers to figure out how much they should be borrowing according to their monthly incomes. Use a home loan calculator to determine how much you can afford to pay. Home loan EMI calculators show how your monthly payment will vary with different home prices, interest rates, and down payments.
Your EMIs Must Be Affordable
Make sure that your EMIs are affordable. Home loans may be long-tenure loans, and you will have to service them for a long time. So, experts feel that your EMIs must be within 25% to 30% of your monthly income. Otherwise, you will face financial crunches, and you may be left with a deficit of finance during emergencies.
Have Savings Enough To Make A Down Payment
You should accommodate a certain amount towards creating a down payment fund every month. Generally, lenders will expect you to make a down payment as part of your loan amount. This may range from 2.25% to 20% of the purchase price of the home. This varies with the type of home loan you choose and the lender. You can arrange for a certain amount of money to be automatically credited from your salary account to your savings account. In this way, you will not miss saving towards your down payments.
Decide A Suitable Repayment Tenure
The time taken to pay off your entire loan is called the repayment tenure. The EMIs and the repayment tenures are correlated to each other. When you opt for home loans with longer tenures, the EMIs will be smaller, but the total interest that you will have to pay for the home loan will be higher. However, when you opt for home loans with shorter tenures, the EMIs will be higher, but the total interest payable for the home loan will be lower. So, if you have a stable job with a steadily increasing income, it is advisable to go for shorter tenures. In this way, you will be saving considerably on the interest paid. You will also repay your loan faster. Banks offer attractive interest rates for those who decide upon a shorter repayment cycle. However, if you want to enjoy the luxury of spending a certain amount monthly to enjoy your life, such as going on a holiday, going to restaurants, shopping, or doing an online course to increase your skills, then go in for a longer repayment tenure. Longer repayment durations also increase your home loan eligibility.
Keep Your Debt to Income Ratio
The debt-to-income ratio is a vital factor in determining your home loan eligibility. It is the sum of all monthly debt payments divided by your gross monthly income. This number is used by lenders to assess your repaying capacity by determining the monthly payments you can make. Therefore, before you apply for a home loan, you should clear all your debt obligations. It will boost your credit score and impact your home loan eligibility. It is ideal to have a debt-income ratio of 20 to 35%.
Know Foreclosure Norms
Keep yourself updated on the foreclosure norms. It is good to prepay your loan because you can make use of those funds for some other purpose. The total interest payable over time will also be lower than if you take the whole tenure to prepay your loan. However, some lenders charge prepayment charges. So, choose a lender who charges zero or minimum prepayment charges. According to the RBI mandate, lenders are not supposed to levy any prepayment penalty on home loans with a floating rate of interest when the borrower is an individual.
Home Loan Eligibility Check
It is important to check your eligibility before applying for a home loan. Documents relevant to your credit history are crucial here.
Do Not Hurry
Do not decide to apply for a home loan in a hurry. Calculate your budget, determine your EMI affordability, choose between floating or fixed interest rates, opt for a suitable repayment tenure, and so on.
These top guidelines to get a home loan will come in handy before, during, and after you apply for a home loan. Apply for a home loan at Creditmantri.com. Interest rates start from 8.4%.
FAQS Tips For Getting A Home Loan
1: What are 5 effective guidelines to get your home loan approved instantly?
Follow these 5 top tips to get your home loan approved instantaneously
- Be aware of your financial condition.
- Pay a higher down payment.
- Maintain your credit score.
- Use the co-applicant feature
- Do not miss filling in any details in the application form. Also, do not fill in any wrong details.
- Look into the errors on your credit report.
2: Can a lender deny a home loan even after pre-approval?
A home loan can be denied after pre-approval if the buyer no longer satisfies the requirement of the loan. For example: A negative credit change could lead the lender to deny you a home loan even after pre-approval.
3: How much time does it take for a home loan to get approved?
The average tenure for a home loan to get approved is around 4 to 6 weeks right from the time of applying for the loan till the time taken for settlement of the property.