Purchasing a house is a huge financial decision for most people. The most convenient method that you can resort to is a home loan. However, it is not easy to acquire one. Many are unaware of the formalities that they have to fulfil to get the home loan approval. Home loan disbursal take at least 20 days.
And those who apply for home loan for the first time should be aware of these basic components:
- Interest rate
- Credit score
- Additional charges
- Documentation process
Buying a new house is a once in a lifetime decision. So, it is imperative to select the perfect scheme. To make the right decision, you have to keep the following pointers in mind:
- Credit score: Before applying for any loan, banks and other financial institutions emphasise on the credit score of the borrower. If you wish to avail a housing loan of your choice, you should hold a decent credit score. The range acceptable by every lender is 700-900. You should have a score of at least 750, to earn a better interest rate on your loan. If you make timely payments of bills and existing EMIs, you can easily maintain the required score.
- Interest rates: Before taking the plunge, check various plans offered by different lenders for the best home loan interest rates. Home loans have two types of interest rates: floating and fixed. Interest rates tend to change over time which could be beneficial for borrowers in the long run. Equated monthly instalments (EMIs) could also vary. Fixed rates remain the same throughout the tenure. So, no implications on EMIs as well.
- Tenure: When you take a housing loan, you have to decide upon the amount and the tenure. Your EMIs largely depend on the tenure. Lenders prefer to consider applicants who go for shorter mandates. Shorter tenure also reduces the burden of interest.
- Documents: Before applying for a loan, have your documents in place. Home loan documents include a passport-sized photograph, ID and address proofs, income proof, property papers, and employment proof. If the papers are in place, the approval process fastens.
- Additional charges: Before you apply for home loan, learn about the extra fees like processing costs, foreclosure charges, pre-payment penalty, down payment, and documentation fees.
You have to consider the above tips before availing the right home loan.