Buying a home is considered a milestone in one’s life. But with real estate prices on the constant rise and financial crunches, many homebuyers are shifting to get home loans. Opting for borrowing is a step closer to fulfil your dream of owning a house.
Housing loans can be used for various purposes apart from buying your dream home. Some of them being the construction of a new house, renovation, purchasing a pre-owned house. Irrespective of your goal or profession, it is advisable to be aware of the loans you choose.
Following is a checklist for your reference to go through before you apply for home loan.
1) Income eligibility:
When banks decide to lend, they do it primarily on the monthly salary that you get in hand or your net income after tax and other deductions. You are expected to pay off the loan in EMIs. This monthly outflow is the primary factor that influences home loan. It is advisable never to let your EMI exceed 40-45 % of your net monthly income.
2) CIBIL score:
Your credit score is one of the determining factors for your home loan. It is easier to get a home loan when you have a good credit score. Banks will consider your credit card usage, how you maintain your bank accounts, any cheque bounces, existing loans, existing uninsured loans, loan repayments, how many times you have applied for a loan or a credit card. If the results are satisfying, they will grant the loan sooner.
3) Interest rate:
Your home loan interest rate has an impact on the monthly EMIs you pay. There are two types of home loans based on the interest rate- floating and fixed. If you opt for a fixed rate home loan, the EMIs don't vary over the loan tenure. In the case of a floating rate, the interest rate is determined based on the prevailing base rates plus a floating rate. You can always switch amongst fixed and floating ROI during your tenure but check about the switching charge that banks may charge; these may or may not apply to your home loan type yet be sure of it.
4) Tenure:
The maximum home loan tenure offered by major lenders is for 30 years. The longer the tenure, the lower is the EMI, which makes it tempting to choose. However, it is advisable to go for shorter tenures that you can afford while filling the home loan application form.
5) Fees:
While applying for a home loan, you are expected to pay charges such as processing fee, legal fees and other administration charges to the lender. The processing charges range between 0.25% and 0.5% and vary from bank to bank. Ensure that you compare the fees of different banks before opting for a home loan.
Housing loans can be used for various purposes apart from buying your dream home. Some of them being the construction of a new house, renovation, purchasing a pre-owned house. Irrespective of your goal or profession, it is advisable to be aware of the loans you choose.
Following is a checklist for your reference to go through before you apply for home loan.
1) Income eligibility:
When banks decide to lend, they do it primarily on the monthly salary that you get in hand or your net income after tax and other deductions. You are expected to pay off the loan in EMIs. This monthly outflow is the primary factor that influences home loan. It is advisable never to let your EMI exceed 40-45 % of your net monthly income.
2) CIBIL score:
Your credit score is one of the determining factors for your home loan. It is easier to get a home loan when you have a good credit score. Banks will consider your credit card usage, how you maintain your bank accounts, any cheque bounces, existing loans, existing uninsured loans, loan repayments, how many times you have applied for a loan or a credit card. If the results are satisfying, they will grant the loan sooner.
3) Interest rate:
Your home loan interest rate has an impact on the monthly EMIs you pay. There are two types of home loans based on the interest rate- floating and fixed. If you opt for a fixed rate home loan, the EMIs don't vary over the loan tenure. In the case of a floating rate, the interest rate is determined based on the prevailing base rates plus a floating rate. You can always switch amongst fixed and floating ROI during your tenure but check about the switching charge that banks may charge; these may or may not apply to your home loan type yet be sure of it.
4) Tenure:
The maximum home loan tenure offered by major lenders is for 30 years. The longer the tenure, the lower is the EMI, which makes it tempting to choose. However, it is advisable to go for shorter tenures that you can afford while filling the home loan application form.
5) Fees:
While applying for a home loan, you are expected to pay charges such as processing fee, legal fees and other administration charges to the lender. The processing charges range between 0.25% and 0.5% and vary from bank to bank. Ensure that you compare the fees of different banks before opting for a home loan.
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