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Every person plans or at least dreams of owning his ideal home. Therefore, buying the dream home is the biggest decision you and your family makes to get settled. For the newbies willing to own a new home, getting a home loan is a suitable way to fulfil their aspiration of buying a new home.
So, if you are thinking to apply for a home loan , it is necessary to understand the entire home loan process because it is a commitment that you are going to stick to for several years until the loan is repaid. That is the reason why we are here to help you; we are going to tell you 10 tips before you sign up for a home loan.
Now, the first step you need to follow is to ensure your home loan eligibility. In theolden days, the lenders would check if you qualify for a home loan based on your income and capacity for repayment. Presently, along with Income and capacity of repayment, the other essential factors that get considered are age, qualification, financial position, number of dependants, spouse’s income, and job stability.
The types of home loans that are available are:
In this particular loan, the interest rate is associated with the standard rate of Banks /Financial Institutions. So, if there is a change in the set rate, the home loan interest rate also changes accordingly.
In this type of loan, the interest rate is fixed when you are applying for the loan. So, this fixed rate of interest is applied for five years only.
This type of loan offers a part of the loan at a fixed rate of interest and other part at an adjustable or a floating rate of interest.
We suggest thatbefore you select your ideal home , get your home loan pre-approved. This will help you plan and fix your desired budget for buying a home. Getting your loans pre-approved also helps to negotiate and close the deals rapidly. You can also ask your lender regarding good and profitable properties at a suitable location. Few Banks/Financial Institutions even provide list of Builer tie-ups(Approved projects) which will help you assure quality of the projects. Itreduces the number of documents required during loan applications and sanction process also gets faster.
According to the regulator, most of the retailloan approving organizations offer a housing loan ranging from 75 to 90 percent of the cost of the property that varies as per the property and your loan value. For instance, if a property is valued at ₹ 50 lakh by the Bank / Financial Institution, you can get a maximum loan of ₹ 40 lakhs (80% of the property cost), depending on your home loan eligibility. If you involve a co-applicant in the income, your eligibility for loan amount may increase. Co-applicant could be your adult child, parent, or spouse or their close relatives as permitted under Union Home guidlines.
The entire cost of the home loan is something that should be taken under consideration while determining its suitability. The home loan cost will also include the interest payments, processing fees, administrative charges, prepayment penalties, etc. Usually, a home loan must have zero prepayment charges for adjustable/floating rate loans. You should be able to convert your loan to a lower rate by giving a nominal fee. While sanctioning a home loan, ensure that the lender is not charging you any hidden costs.
EMI (Equated Monthly Instalment) is the amount you pay back to your Bank / Financial Institution every month. It consists of repayment of the principal amount and interest on the outstanding amount of the loan.
The home loans are sanctioned for a max of 30 years, subject to your eligibility. Longer loan tenure is suitable to reduce the burden of EMI every month. For instance, for a 20-year home loan tenure of ₹ 10 lakh at an interest rate of 10.40 percent, the EMI will be ₹. 9,917 and for a 30 year tenure it will be ……9073……..
Documents required for sanctioning a home loan are:
These documents will include your ID and address proofs. Few of the documents of the same are valid passport, voter ID card, Aadhaar card, etc.
These documents are important for the Bank/Financial Institution to check your loan eligibility. If you are employed you can easily submit your salary slips for the last three months, alongwith your ITRs. If you are self-employed, you can submit your ITR (income tax returns)showing income for the last three years.
This set of documents includes the agreement to sell, the title deeds, etc. The Bank/Financial Institution does due diligence on the property based on the documents.
Along with KYC documents and credit/income documents you need to submit the home loan application to get the home loan approval; whereas for your home loan disbursementyou have to submit the property documents in original.
Concluding, buying a house is a huge decision. It is a very fulfilling experience you will have in your life. A home loan is a best way to own your home. So are you ready now?? Click here to apply.