Buying a new home requires a huge sum of money and most buyers depend on financial assistance.
Home loans can help you realize the dream of owning a home without waiting to save up for the full cost. Home loans also come with tax benefits.
If you’re looking to buy a home using the mortgage route, here are a few things to keep in mind.
A healthy CIBIL score, better than 750, will likely increase a borrower’s chances of getting a home loan. The score also has an impact on interest rates and the term of the loan.
So, if you are considering getting a home loan, it is advisable to clear all your pending loans and follow disciplined financial practices to increase your CIBIL score.
When applying for a home loan, the borrower must submit a series of supporting documents, including proof of income, bank statements, and property documents.
Based on this documentary evidence, the lender offers an approval in principle for the loan application. Final loan sanction is subject to positive verification of ownership.
A sudden loss of income due to market instability, illness or any other problem can affect the borrower’s ability to repay the loan. It is important to have a plan B for loan repayment while considering home loan options.
To secure future repayment of the loan, it is advisable to secure a lump sum equivalent to at least six months of estimated EMI. This cash reserve will help you pay off the home loan in an emergency without borrowing from your other investment.
Banks only offer part of the value of the property as a loan. Lenders generally offer a loan between 75 and 90% depending on the borrower’s eligibility and other factors. The borrower must pay the remaining amount as a deposit at the time of purchase.
Making a large down payment when purchasing the property can help reduce your monthly obligation or shorten the term of the loan.
Loan terms and conditions
Before finalizing the loan, it is important to familiarize yourself with the terms and conditions of the option.
While a loan looks cheap with a seemingly low EMI, the lender may charge hidden fees and higher processing fees. Borrowers are advised to compare all available options in the market to get the best deal.