10 Crucial Factors to Consider Before Applying for a Home Loan
A home loan, also known as a housing loan, is a lump-sum amount of funds. It can be borrowed by an individual from a lender to purchase a desired house.
To buy a house property, you need a big corpus of fund for the long term. A home loan facility is an option that helps you to achieve a dream of owning a property.
Availing of a tax saving home loan facility is an important decision you should make while checking specific parameters.
Here are the 10 important factors that you should keep in mind before availing of a home loan:
- A regular source of income
You should have a regular source of income as a home loan is a long-term financial commitment. Lenders always assess your credibility and repayment capacity before financing a home loan. Make sure you have a regular source of income with a good future earning capacity to achieve your financial goals.
2. A good CIBIL score
A credit score of 750 and above is considered good to make financial transactions. Lenders will provide funding at a lower housing loan interest rate only if your credit score is robust. If your credit score is lower, you will be charged a high interest rate on your home loan. You should always keep your credit history clean and your credit score high before applying for a housing loan.
3. Adding a co-applicant
Do you want to avail an amount of loan higher than your borrowing capacity? You should always add a co-applicant to the housing loan deal. It will help you in getting a higher loan amount at a lower interest rate.
4. Changes in repo rate
The housing loan interest rates are usually based on the repo rate. If there is a change in the repo rate in future, the housing loan interest rate will also change accordingly. An increase in repo rate can increase the interest rate, thereby increasing your monthly EMIs. Before applying for a home loan, you should always keep a check on the changes in the repo rate.
5. Debt structure
Before applying for a home loan, you should always try to close your small loan deals. It will help you to reduce the financial burden in the near future.
6. Adequate margin money
When you apply for home loan, the lender finances a major percentage of the property value. You have to bear the remaining part of the property’s value in the form of a down payment. You have to bear other expenses like stamp duty charges, registration charges, and the like. To bear all these expenses, you should have sufficient margin money in hand.
7. Contingency fund
To pay up monthly EMIs, it is important that you have an adequate contingency fund. It is so that you do not land up yourself in a financial crisis in future.
8. A longer loan tenor
You must try to opt for an extended housing loan term. It will help you to reduce your monthly EMI instalments and don’t strain your wallet.
9. The budget
You should always buy a house property based on your current financial situation and budget. Buying a house over your set financial budget can increase your loan amount, thereby increasing the EMIs.
10. EMI payments
Depending on the housing loan interest rate and loan tenor, you should avail of a loan amount with affordable EMI payments. Any delay in the payment of an EMI can lead to penalty charges. An online home loan EMI calculator can help you know the exact amount you will pay as the EMI. You can also use a home loan tax benefit calculator to determine the amount you will save on repayments.
Before deciding to apply for a home loan, you should consider the factors mentioned above.
In turn, it will help you to get the best home loan deal for your dream home.
Read Also: 5 Vital Tips to Get the Lowest Home Loan Interest Rate that Satisfy your Income