Summary – It is important to consider a few factors before applying for a home loan. This article outlines the major factors.
Buying your dream home is a milestone in every individual’s life. But it is not easy to have the funds ready to finance it. In such cases, a home is a perfect solution. With that comes debt, and it is important to ensure that a loan does not stress out your financial health.
When submitting a home loan application online, several other factors need to be considered: whether you qualify for a home loan, what documents are required, etc. Ensuring you keep these in mind significantly enhances your loan experience and ensures a better relationship with your lender.
Lenders thoroughly assess your repayment ability when a loan application is submitted. This is based on multiple factors. They essentially evaluate your financial profile based on your earnings, expenses, savings, work profile, financial capability and repayment history of loans and other dues. The following are 4 important tips to keep in mind before you apply for a home loan.
Affordability of debt is the biggest factor when going through the loan taking process. This is largely dependent on the interest rate and monthly EMI payments. To get an estimation and fair idea of you’re your interest rate may look like, you can use the home loan interest rate calculator. It is a great tool to help you determine what kind of a loan you can and can not afford. It also helps you narrow down the search for a lender.
The first step is to define your budget for buying a home. During this process, you must consider:
- How much money you can set aside for the down payment.
- Much of a home loan would you require.
- How many years you are willing to undertake the loan.
- The EMI range you are comfortable with.
In most cases, you can get 80% of the property’s value as the home loan amount if your income is sufficient. If your income is not sufficient, you can add your spouse or a close family member with a stable income and a good credit score as a co-borrower. Considering these points before searching for a lender helps you determine the nature of your loan.
A stellar credit score is a foundation for an easy home loan application process. Your credit score is dependent on how consistent you are according to your record for paying out EMIs and credit card dues. The credit information report (CIR), which consists of your credit score, represents your credit history of the previous borrowing from different financial institutions, banks, NBFCs (Non-Banking Financial Company), or Housing Finance Companies (HFCs).
A trusted credit bureau must maintain your credit scores and record. This information is then shared with the banks or lenders when they enquire. It is only predictable that the higher the credit score, the higher are your chances of the loan application getting approved.
A good credit score can also sway the interest rate in your favour as it shows a high repayment capacity. Make sure you check your credit score at least once in six months, and best-case scenario, 12 months before applying for a home loan.
Documents Required for Home Loan
Before you apply for a home loan, it is important to understand and know all the necessary documents. Ensure all the required documents are available before you approach a bank, lender, or housing finance company. Doing this can expedite the process and make the sanction period shorter. The following is a list of documents that you should keep handy:
- Income Tax Returns
- Form 16 for the last 2-3 years (make sure all taxes are filed)
- PAN Card (the lender will carry out a PAN card Verification to ensure it is authentic)
- Aadhar Card (the bank will need your Aadhaar card to verify your identity)
- Bank Statements for the past 6-12 months (from a bank account where your income is credited and expenses are deducted)
- Ensure you maintain a good balance in the income and expenses bank account over the past 6 months
- Salary slips of the last 3 months if you are a salaried person.
- Duly filled application form.
- Passport-sized photographs Duly signed.
Having the documents mentioned above is a must and required to ensure a smooth loan taking process.
Identify the Right Lenders
Before applying to several lenders, do thorough research and shortlist a few. Applying to too many can negatively impact your line of credit. Select one or two lenders that match your requirements best and get your loan sanctioned before booking the property.
It will help if you compare your options based on your financial requirements out of the loan. Additionally, having a strong understanding of the eligibility criteria of home of all the shortlisted lenders promises a faster loan sanction.
Take into consideration these points before applying for a home loan to ensure a speedy sanction and seamless verification process. Do your due research and commit to a lender with competitive interest rates and flexible repayment tenures!