What Do You Need to Know Before You Avail a Home Loan?

What Do You Need to Know Before You Avail a Home Loan?

Home loans can make your dream of buying your own house come true. However, it is a big commitment that runs through years until you can repay the entire loan amount.

You should also know the basic components of a home loan in order to select a suitable home loan offer for you.

First-time applicants are required to be aware of a number of things such as Home Loan  interest rate, several fees, credit score, documentation etc. 

Here are seven things you need to know before applying for a home loan –  

1. Home loan eligibility criteria – Home loan eligibility not only means being eligible for a loan or not but also a process of knowing that how much loan amount you can get. When you apply for a home loan, the lenders check your eligibility based on various factors like a stable income, repayment capacity, qualification, financial position and job stability, etc.

2.Types of home loans – There are three types of home loans available, namely floating rate loans, combination loans and fixed-rate loans.

  • Adjustable or Floating-rate loans: This type of loans are most popular because the interest rate is linked to the lender’s benchmark rate, which means If there is any change in the benchmark rate, then the interest rate proportionately changes.
  • Fixed-rate loan: The interest amount is fixed while taking the loan, and that rate of interest remains the same throughout the tenure of the loan.
  • Combination loans: These loans offer a half amount of the loan at a fixed rate of interest and the rest amount at a floating rate of interest.

3. How can you use the home loans – Home loans can be used for several purposes, like for building a house on a previously owned land, expanding or repairing of the existing home and for buying a house. 

4. Loan amount – Most lenders offer loan amount ranging from 75% to 90% of the value of the property depending on your loan eligibility.

In other words, if the property is valued Rs 50 lakhs by the lender, then you can avail a maximum loan amount of Rs 40 lakhs, depending on your home loan eligibility.

In other words, if the property is valued Rs 50 lakhs by the lender, then you can avail a maximum loan amount of Rs 40 lakhs, depending on your home loan eligibility.

However, if you can include a co-applicant, then his or her income can also be considered by the lender in order to increase the loan amount. The co-applicant must be an adult family member, parent or spouse of the applicant. 

5. Tenure of a home loan – The cost of home loan is also one of the major factors that a customer should consider before assessing its suitability.

Depending on a customer’s eligibility, home loans can be sanctioned for a maximum period of 30 years. The longer the loan tenure is, the lesser the EMIs will be. 

6. Documentation needed for availing a home loan: A person can stay in one location, buy a property in another location while servicing his or her home from a third location. In that case, proper documentation is very important to avail home loans.

Such documentations include KYC documents, Credit card statement, income slip or property details. KYC documents like passport, voter ID card, aadhaar card or pan card as identity and address proof are also needed.

Besides, in order to prove employment eligibility, either a person can submit his or her salary slips of the last three months, or a self-employed candidate can submit the income tax returns along with income records of the last three years.

7. Down payment – For availing a home loan, generally, the applicant needs to pay 10% to 15% of the total amount as a down payment while the rest of the expense is covered under home loan, for which the applicant is required to pay EMIs.

However, If a candidate can increase the down payment, then it will help him to save on the interest expenses.

A home loan is one of the easiest ways to make the dream of having your own house come true. So you can consider these points before applying for a home loan.

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