Home loans help you fulfil your dreams of having your own house/flat without dipping into your savings or worrying about financial constraints. You get a sizable credit amount for an extended period at an affordable interest rate. Nevertheless, if you are applying for housing loans for the first time, you can face difficulties in determining a suitable lender. You must be in want of tips to find the best option from the overall lending market of India.
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Factors to Consider While Opting for Housing Loans in 2022
Following are some aspects you need to be mindful of to get the maximum benefit from this credit facility:
1. Get Loans with a Higher Down Payment
In a housing loan, you need to pay more than 20% of the overall construction cost, since the LTV ratio of a home loan is up to 80%. So, you need to build financial discipline and start saving to make a sizeable down payment.
A substantial down payment will reduce your loan obligations. Resultantly, you can opt for less tenure or reduce your installments.
2. Work on CIBIL Score
To be eligible for a home loan from most lenders, you must have a credit score over 750. This reflects creditworthiness and positive track record of debt repayment. To maintain a healthy credit score, you need to repay loans/credit card bills timely and avoid applying for loans more than your financial capacity.
3. Meet Eligibility Criteria
You also need to meet the eligibility requirements of lenders to secure a loan without rejection. Eligibility requirements vary across financial institutions in India. You need to visit the lender’s official website to find these eligibility requirements.
4. Keep Documents Handy
You also need to be aware of the documents that you must keep updated and handy during the home loan application. Following are some essential documents that the financial institutions require while accepting loan requests:
- Property Documents: Sales deed, possession certificate, tax receipt, occupancy certificate, etc.
- Identity Proof: Aadhaar card, PAN card, voter ID card, passport, driving license, etc.
- Address Proof: Telephone bill, electricity bill, voter ID card, etc.
- Passport size photograph
5. Determine the Loan Repayment Capability
While applying for a housing loan, you also need to determine the EMI amount according to your loan repayment capacity. An excessively high EMI amount can prevent you from meeting financial obligations. You may even fail to make EMI payments timely and may end up paying penalties.
6. Use Home Loan EMI Calculator
After determining a suitable installment amount, you need to decide on a comfortable loan tenure. Using a home loan EMI calculator, you can easily get your loan repayment period according to your financial capacity.
7. Compare Lenders
Though interest is the largest component in the borrowing cost, there are several other influencing charges involved as well. So, you need to compare fees besides the interest rate, including processing cost, stamp duty, prepayment/foreclosure charge, etc., of different lenders. It will help you to keep your borrowing cost at a minimum.
8. Go through the Loan Agreement Paper
While signing on housing loan agreement papers, you must understand all the aspects written on it. It contains information about the collateral, loan duration, and applicable terms and conditions. Knowing these can help you avoid any confusion regarding repayment, foreclosure, etc.
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9. Choose a Suitable Interest Type
You can avail a housing loan credit facility at either fixed or floating interest rates. Although the former keeps the interest outgo fixed, it comes at a higher rate.
On the contrary, in floating rate home loans, the interest rate keeps fluctuating according to a set benchmark. It may be a profitable option as the interest rate is lower. However, if the interest rate becomes higher, you will need to pay more per EMI.
In short, housing loans give you substantial credit at a lower interest rate to fulfil your dreams of having your own home. However, while opting for this credit facility, you need to plan well and check various factors mentioned above to ensure that you do not face difficulty in repaying the loan.