Factors To Consider Before Getting A Home Loan

1. Factors To Consider Before Getting A Home Loan Home is a personal asset that every individual dream of owning. Along with financial investment, it has several emotional values. Buying a house is not as easy as it is said. Many people fail to fulfil their dream of owning a house for the sake of other financial needs like retirement planning, children’s education, building emergency funds, etc. However, thanks to home loans that helped numerous people to fulfil their dream of buying a house. Key Aspects to Consider While Applying for Home Loan Purchasing a house is a big financial decision. People save for years to buy a house. However, inflation and increasing the price of properties make it hard to buy the house. This is the time where home loans come to the light. These are the financial tools that help people to buy the house and fulfil one of their dreams. However, rushing for a loan just to turn your dream into reality is not advised. Getting a home loan is not as easy as it involves numerous formalities. To avail the loan, individual need to submit an application with several documents and fulfil the formalities. Before you apply for a home loan, it is important to pay attention to a few key aspects such as •Credit Score The first and important factor that banks or housing finance companies consider before providing loan to any applicant is the credit score. Therefore, if you wish to avail the loan for purchasing a house, you need to maintain a good CIBIL score. Having a credit score of more than 750 helps to avail a home loan, but to get a better interest rate. You can maintain a good CIBIL score by making a timely payment for existing loans and credit cards without fail. •Down Payment To avail the home loan, the applicant needs to pay down payment that is nearly 10% to 15% of the loan amount. The remaining amount of loan is converted into the EMI that you need to pay each month. In case you have additional cash, you can increase the amount of down payment. Paying more in down payment would help in saving on the interest that you need to pay in future. •Tenure of Loan Another significant factor that holds the utmost importance is the duration of the loan. Before you apply for a loan, you need to decide the tenure as the EMIs of the loan depends directly on the tenure. Opting for a shorter repayment period is a beneficial choice as it reduces the interest burden on EMIs. With shorter tenure the monthly instalment would increase, however, it would help in decreasing the cost of the loan. •Rate of Interest While applying for a home loan, it is important to pay attention to the interest rate offered by numerous banks as well as housing finance companies. Comparing the interest rates of different lenders would help you avail of the loan at the lowest

2. interest rate. Before that, it is important to know about the types of interest rate. There are two kinds of interest rates i.e., fixed, and floating. In case of a fixed rate, the EMI of the loan does not change over the loan tenure. Whereas in case of floating rate, the rate of interest is calculated according to MCLR (marginal cost of funds-based lending rate). Under this, the interest changes over time. The fixed rates come with the striking offer and EMIs are higher with fixed interest rate. Opting for the floating interest rate is a good choice as interest rate varies and you can save on interest and monthly EMIs. •Processing Fees The processing fee is the charge that borrower needs to pay after the acceptance of loan application by the lender. Generally, the banks and housing finance companies charge processing fees of up to 1% of the loan amount. However, it is advised to look for a lender charging low processing fees. •Foreclosure Norms Foreclosure refers to the repayment of the outstanding loan before the loan tenure ends. It is true that the soon you repay the loan, the less interest you need to pay. Usually, the banks and house financing companies charge a penalty for repaying the loan early. Apart from these aspects, ensure you consider the additional charges, some banks and housing finance companies might charge additional charges at the loan application time. Ensure you discuss these charges beforehand. In case you apply for a home loan online, ensure you read the fine print carefully. Missing even a minor detail could result in major financial obligations in the future. If you are unable to understand anything, consider taking the help of experts.