Owing to increasing real estate prices, opting for a home loan, may now feel like a necessity for potential homebuyers. This comes as no surprise, as a home loan offers the right amount of funding to facilitate the purchase of your dream home along with certain value-added features that first-time borrowers can benefit from. Moreover, many homeowners consider opting for a home loan even when they’re looking to renovate or work on a home improvement project.
However, before moving ahead with your plans, there are a few things to keep in mind to secure the most favourable deal. This helps ensure your home loan EMI amount is manageable so you can enjoy a comfortable repayment throughout. Additionally, as a prospective borrower, it helps to be aware of the many factors that affect home loan eligibility criteria and the home loan interest rate offered to you.
Take a look at these 5 things to keep in mind before opting for a home loan.
Check your credit score
Your credit score is an important part of your profile because it allows lenders to assess your potential for repayment. With a score of 750 and higher, your chances at approval increase greatly because this is an excellent score. It is achieved by maintaining a clear repayment track record and by experiencing a healthy mix of both secured and unsecured credit.
Checking your score before you apply is important because lenders usually have a minimum requirement as part of their home loan eligibility criteria. Some require you to have a score of 650 to qualify, and others 750. Failing to meet this requirement may result in a rejection or will cause the lender to offer unfavourable loan terms.
Know how to choose the right type of home loan interest rate
Lenders offer two types of interest rates. The one that you choose depends on your income stability and your appetite for risk.
- Floating: A floating home loan interest rate fluctuates as per market conditions and is generally set to 1% to 2% less than the fixed rates. It is ideal for borrowers who aren’t risk-averse as there are chances that the market shifts unfavorably, causing you to pay a higher amount as interest. However, it also allows you to benefit from low rates.
- Fixed: Fixed home loan interest rate will be constant throughout the tenor (until the reset date) and is an ideal option for borrowers that have a lower risk appetite. In this case, the rates are higher but there is lower risk involved as the rates don’t shift as frequently based on the market.
Check all the lender-specific requirements
Lenders often have varying requirements, be it the home loan eligibility criteria or the documentation required to process the loan. This is why you should check these with the final lender you end up opting for. Failing to meet these requirements can be quite troublesome as lenders follow these protocols strictly. It can also lead to delays in loan processing, which can further affect the purchase, especially if it is on a deadline.
Generally, the requirements are as follows.
- Eligibility criteria:
- Applicants must be between the ages of 18 and 70 years
- Applicants must have a stable source of income
- Applicants must have a CIBIL score of at least 650
- Applicants must pick a property approved by the lender
- Documents required:
- ID proof
- Proof of age
- Address proof
- Income documents
- Property documents
Identify the ideal loan repayment tenor
The tenor dictates the home loan EMI amount payable and is a critical factor to plan for. Thankfully, with an EMI calculator, you can very easily identify the right tenor based on either the EMI amount or the total interest payable. Ideally, it should be a balance of both these factors for optimal outgo.
Armed with the information you need to know before opting for a home loan, you can now choose the right lender confidently. A great option to consider is the Bajaj Housing Finance Limited Home Loan as it features a competitive home loan interest rate, a flexible loan tenor of up to 360 months, and an ample sanction, perfect for your home-purchase needs. With this instrument, opting for a home loan has never been easier. All you have to do is meet the easy home loan eligibility criteria, apply online, furnish basic documents, and await loan approval.