Home loans can be really difficult to buy because it is such a crucial financial decision that decides one’s financial state for years to come. Except for the dilemma of whether or not to opt for a home loan, the loan itself comes with a lot of formalities to meet, which are supposed to be met if one wants to get the loan sanctioned; this makes home loans extremely difficult to get approved. For people opting for their first home loan, a lot of research needs to be done about the loan itself and different things related to it like interest rates, several other fees, credit score, etc.
Some Important Points Related To Home Loans Are Discussed Here:
#1. Interest Rates: There are mainly two types of interest rates, i.e. fixed and floating. Floating rates change over the tenure of the loan and are based on MCLR (Marginal Cost of funds-based Lending rate) and can be advantageous since the interest rates can fall or decreases, as time goes on. The fixed rate is self-explanatory; the rates do not change over the tenure of the loan.
Anyone opting for their first home loan should be extremely cautious and research about the various interest rates of any and every trusted bank and other financial institutions.
#2. Processing Fees: Every borrower needs to pay processing fees to the lender whenever the loan application is approved; this value is 1% of the principal value of the loan. Giving unnecessarily high processing fees is nothing but a waste of time and should be avoided by looking into various banks and finding out which bank charges the modest processing fees.
#3. Credit Score: Any bank, before sanctioning loan checks the credit score of the borrower, this is the most crucial factor for a person who wants to get a home loan. Thus, it is important that one should keep a good credit score if they want to get their loan approved. Usually, a CIBIL score over 750 is needed to get a home loan. The credit score also influences your interest rates for the loan. One can maintain good credit scores by paying credit card bills and any other existing loans in time.
#4. Financial Documents: One must make sure that they keep all their financial documents assembled, which they need to submit to the lender. This will speed up the process a lot because usually a lot of unnecessary running around needs to be done to collect the documents within a short time period. So, it is better that one takes their time and collect the documents before approaching the lender for the loan.
#5. Equated Monthly Installments: Also known as EMI, these are monthly installments that the borrower needs to give to pay back the loan. This monthly amount totally depends on how much down payment was made by the borrower. One must make sure that their EMI is never more than 45% of their total income. Else, it can affect your budget adversely.
#6. Foreclosure Norms: This means that the borrower has returned the outstanding amount before the end of his home loan tenure. This is a good practice since the faster you tend to pay the loan, the lesser interest you need to pay, but banks usually charge a penalty for foreclosure. This does not happen with floating interest rates.
Keeping these few points in mind, one can easily be prepared to apply for their first home loan. One thing to keep in mind before applying for a first home loan is that one must read all the documentation related to the loan carefully. This is all one needs to know before applying for their first home loan.