Owning a house is one of the major financial decisions you could ever make in your life. And if you are someone who’s planning to take a home loan to fulfil this dream, then it’s important to understand all about it because it’s a commitment that you have to live by for years to come. So, without further ado, let’s learn about a few things you need to know before you apply for a home loan .
- Eligibility Criteria
For you to qualify for a home loan, you should meet certain criteria. Lenders will first assess your eligibility. This would be your income and repayment capacity. Once, that’s done, they would look at other factors like qualification, age, spouse’s income, job stability, financial position and number of dependants. It’s only when you pass through all of this is when you will become eligible for a loan.
- Types of Home Loans
There are different kinds of loans that you could choose from when you’re planning to get a
Adjustable or Floating Rate Loans: In this kind of loan, the interest rate will be linked to the benchmark rate of the lender. So, if there is any kind of change in the benchmark rate then the interest rate also changes.
Fixed Rate Loan: In this type of home loan. loan, the interest rate is fixed right from the time of taking the loan, so this means, the rate of interest would be the same throughout the tenure of the loan.
Combination Loans: As the name suggest, it’s a mix of adjustable loans and fixed rate loans. So, the first part of your loan will be at a fixed rate of interest, while the other part of it will be applicable to adjustments.
- Home Loan First
It is always advisable to first get your home loan approved before you go ahead and select your home. Getting your home loan approved first, helps you to fix the exact budget and it would also make your journey of finding the home easier. When you get your loans pre-approved it helps you to negotiate in a better way and also closes the deal faster. This also helps you check with your respective lender about any good properties in your preferred area where you choose to buy your home.
- Loan Amount
Lenders would usually sanction a housing loan ranging from 75 to 90 percent of the cost of the property – this would depend on the loan value. However, if you want to include a co-applicant then his or her income could be considered in order to increase the loan amount. So, the balance amount towards the purchase of your property would be made by you.
Equated Monthly Instalments (EMI) is the amount that you need to pay each month once you’ve taken a loan. This would include repayment of the principal amount including payment of interest on the outstanding amount of the loan. For this, you can use the home loan EMI calculator to get a better idea about the same.
Pre-EMI is used for loans taken for properties that are still under construction. In this kind of situation, the loan would be disbursed in stages (instalments) that you need to pay to the builder. For this loan, you are required to start off by paying the interest on the loan amount that’s disbursed.
Tenure is the period taken to repay the loan. Home loans are usually sanctioned for a maximum tenure of 30 years – this would depend on your eligibility. But, you must remember that a longer tenure would mean less EMIs and a shorter tenure would mean higher EMIs.
When you apply for a loan there are certain documents that you need to submit to the lender. Some of the documents are as follows:
KYC Documents: This would include address proof and identity. For this, you could submit documents like voter ID card, valid passport or your Aadhaar card.
Credit or Income Documents: These documents are needed to access your loan eligibility. These would include salary slips for the last 3 months or income tax returns along with the computation of income for the last 3 years, if you are self-employed
These would include title deeds, agreement to sell, etcetera. The lender would then do a due diligence on the property once these documents are received.
So, these are a few important things you need to know before applying for a loan, in order to keep yourself well-prepared beforehand.