A home loan is one of the most availed loans. When many banks are offering a variety of schemes, it may get difficult for you to determine which option would be the best for you. So, for your initial research, take the help of the people around you to discuss and compare all the options available in the market. Then, make a final list of the banks/lenders you are interested in.
From your final list, read the reviews of each lender. Reviews from past customers reveal a lot of information about the bank. Make use of this information to make an informed decision regarding which lender to choose.
Consider the Home Loan interest rate, the fine for late payment, the penalty for prepayment, and other additional fees before choosing a particular institution/lender.
While choosing a principal amount, check if you can afford the down payment. Make use of your savings for the down payment. Also, make sure you have a short tenure. A shorter tenure means you will be able to close the loan faster. Also, look for pre-payment options without any charges. This will again help you in faster repayment of your home loan.
So, finally, you are inches away from buying your dream house! A home loan is all you need. The options in the market are only increasing, and you do not know how to choose what is best for you.
Doing the preliminary research
If you have friends, colleagues, or family members who have previously availed home loans, you can approach them for advice and help. Friends in the banking sector might also be willing to help you in comparing the home loan schemes provided by various financial institutions. Also, there are many online websites where you can compare the pros and cons of different home loan schemes.
Once you have shortlisted a few options that you think might work for you, it is time to study the reviews on your potential lenders. Reviews from past customers will give you a bulk of information ranging from – customer friendliness of the lender, how open are they to negotiations, to the speed with which applications were processed, how quickly was the loan sanctioned, and much more.
After carefully looking at the reviews, you may proceed to finalize one or two potential lenders for your home loan.
Factors to consider
Many borrowers consider only the interest rate while applying for a home loan. Of course, the interest rate is a major factor. However, there are a host of other factors that play a role too. You must take a look at the processing charges, fee charged by the lawyer to review agreements if there are any penalties for prepayment and fines for late payment.
You have to furnish certain documents to complete the KYC procedure. Documents for age proof, id proof, address proof, and income proof have to be submitted. Also, the documents relating to the property against which you are requesting the loan are required.
Deciding the amount
All banks will give only 80% (or less) of the value of the property which you are buying. The rest of the amount is paid as a down payment. While selecting a property, keep in mind how much as a down payment you can afford. If you make a larger down payment, your loan amount will reduce.
Even before you apply for a loan, you can use an online home loan EMI calculator to estimate how much your EMI will probably be. Depending on this, you can decide your principal amount.
Processing of the loan
Lenders would understandably not be willing to sanction loans to applicants who fall in the high-risk category. Therefore, your credit score will be taken into consideration, and your credit history will be reviewed. If you have been punctual in paying your EMIs in the past, there is no need to worry.
Also, the lender will determine if you will be able to repay the loan amount you are requesting by checking your income, the net income of your family, your monthly expenses, other loans that you are currently repaying, and other such things.
Negotiating the terms of the home loan
It is always advised to maintain a good credit score. With a high credit score, you can negotiate better. If you are lucky, you may even get them to waive off the processing charges.
Always, your loan tenure should be as short as possible. A longer tenure essentially means you will be paying off a higher amount.
Once you receive your loan offer from your bank, have a discussion regarding the terms, with the concerned officials.
Look for home loans with options for prepayment without penalty. This way, you can pay off the loan faster and close it before the actual term.
Factors impacting the EMI
Some of the major factors influencing the EMI that you will be paying on your home loan are – the method used to calculate EMI, the option of partial prepayment, the borrower’s age and income, the loan tenure, and the rate of interest.