Have you finally decided to take the next step towards fulfilling your dream of becoming a homeowner? Are you planning on applying for a home loan to help you realize your dream? If yes, this article is a must-read for you. In this article, we discuss some handy home loan tips to help you meet with quick home loan approval and also be eligible to avail of your home loan on terms and conditions that work best for you. So, read on.
Best Home Loan Tips
1. Do Thorough Research
Most homebuyers go ahead and apply for a loan with a popular lender or a lender with whom a family member or friend is already servicing their loan when homebuyers should actually do their own research. Instead of going ahead with a lender recommended by friends and family, they should enter the market place and research on their own about the various lenders and the pros and cons of working with each of them. They should then reach out to the lenders that appeal to them and negotiate with them to understand what they are willing to offer. Doing thorough research equips borrowers with high negotiating power and avail of the best loan offer.
2. Use Home Loan Calculators
Before initiating a home loan application, home loan applicants must use online handy tools to help with loan repayment planning. Home loan applicants must use the home loan EMI calculator to work out the loan amount and the EMIs that they can afford based on their age, income, etc. Applicants must also use the home loan eligibility calculator to work out the loan amount they are eligible for. Applying for a loan amount one is eligible for leads to quick loan approval. In conclusion, these various online home loan calculators are easily available, easy to use and help minimize chances of loan default.
3. Check Your CIBIL Score
A good CIBIL score for home loans is 750 or above. The CIBIL score ranges from 300 to 900 and is an electronic representation of one’s creditworthiness and repayment capacity. A high credit score indicates high repayment capacity. A low CIBIL score, on the other hand, raises red flags. Lenders offer their best home loan deals and lowest housing loan interest rates to borrowers whose CIBIL score exceeds 750. So, before beginning your home loan application, check your CIBIL score and move ahead with the loan process only if your CIBIL score is at least 750. If you do not have a good CIBIL score for a home loan, it is best to wait and improve one’s credit score and then apply for a loan.
4. Save Enough for Down Payment
Homebuyers planning to apply for a home loan can avail themselves of a loan only when they pay the down payment. Lenders require home loan borrowers to arrange for and pay a certain percentage of the property’s market value on their own. This amount that the home buyer must arrange on their own is known as the down payment. To be eligible for a home loan, one must at least pay 25% to 30% of their home’s value as down payment. One can always choose to pay a higher down payment amount than is required or is the norm. Paying a higher down payment than is required gives borrowers higher negotiating power over lenders, allowing them scope to ask for better or lower housing loan interest rates, a higher loan sanction and a longer repayment tenor. So, if you are planning on buying a home in near future and would need a home loan to facilitate your purchase, start saving for the down payment.
5. Prepare All the Documents
If you want to experience a hassle-free home loan verification process and get approved for a loan quickly, go to your lender’s website and look for the list of documents you will need to attach with your home loan application. Keep original and soft copies of all these documents ready with you. In general, lenders ask for KYC, address proof and income proof documents. Over and above this, you will also be required to provide all property documents. So, keep them ready with you.
6. Discuss Prepayment and Foreclosure Charges
As per the latest RBI guidelines, individual home loan borrowers on floating interest rates can prepay or foreclose their loan at any given time without paying any prepayment or foreclosure fee. However, lenders can ask borrowers on fixed interest rates to pay a penalty. Before signing the loan agreement or while you are negotiating the terms and conditions of your home loan, seek clarity on home loan prepayment and foreclosure charges. This is crucial as most home loan borrowers want to try to become debt-free before the agreed tenor.
7. Read the Loan Agreement Carefully
Here’s the most important home loan tip: do not sign your home loan agreement until and unless you understand and agree with everything mentioned in the loan agreement. A lot of home loan borrowers make the mistake of signing the loan agreement without fully understanding it. If there is a loan term or condition that you do not understand, approach your lender’s representative and seek clarity. If the loan mentions something that you do not agree with, request for another round of negotiations. If something confuses you, hire a legal expert but do not sign the loan agreement until you have gone through and dissected well every word mentioned in your loan agreement.
A home loan is a commitment that usually lasts a few decades. It is a huge commitment that will have a major impact on every aspect of your life. Therefore, borrowers must avail of a home loan after careful planning. The home loan tips mentioned in this article will certainly help home loan borrowers take right decisions regarding their home loan.