Buying a house is a dream for many. However, with the rising costs of home ownership, it has been increasingly difficult for individuals to buy houses without taking a loan. A home loan, also known as a mortgage loan, allows you to purchase a house by borrowing money from a lending institution. You have to return the loan amount along with the additional borrowing charges in monthly installments over a period. Read on to know more about home loans, the various factors to consider before taking a home loan, and how to apply for home loans.
Things to note when applying for home loans
- Check your credit score: If you want favorable loan terms and an affordable interest rate, you must have excellent CIBIL scores. Credit scores are your financial report card. They reflect your past record of paying back loans and if lenders view you as a responsible borrower, they will most likely offer you lower interest rates.
- Use a home loan EMI calculator: It is always best to check your monthly settlement amount before going forward with sanctioning the home loan. Ideally, you should not spend more than 50% to 60% of your income on EMIs. ApnaPaisa offers a home loan EMI calculator online, where you can check this amount.
- Evaluate the loan terms: Make sure to sign up for a home loan that suits your financial needs. Do not borrow more than you can pay off. Check the loan terms, repayment period, interest rates, processing fees, tax charges, and additional costs. These costs will influence your monthly EMI amount.
- Understand the additional costs: Owning a home is not just as simple as paying the mortgage. You have to factor in other costs like property taxes, maintenance expenses, renovation charges, registration fees, and home insurance. Most of these payments have to be made as soon as your home loan is sanctioned, so plan ahead and put away money for these costs.
- Make a higher down payment: One sure way to guarantee lower interest rates on your home loan is to make a higher down payment. Put away some money in a savings account from the time you begin to look at potential future homes. However, do not run yourself dry and exhaust all your savings accounts to pay a higher down payment.
- Note your FOIR: Your fixed-income-to-obligations ratio (FOIR) reflects your number of ongoing debts. You should not spend more than 50% of your income on monthly EMIs, so unless you earn enough to pay the monthly settlements comfortably, you should not avail of a home loan. It may seem feasible for a couple of months, but living on such a stringent budget is not sustainable in the long run.
- Choose a reputed lender: Getting a home loan from a well-known institution has many perks like better loan terms and flexible repayment tenure. You can consult their experienced professional for financial advice.
- Try to get pre-approved: If you have already availed of any loan from a financial institution and have always been up-to-date with your monthly EMI payments, you can try to get pre-approved for another loan. It largely depends on your relationship with the lenders and your repayment history. Getting pre-approved marks you as a reliable borrower and naturally, you are eligible to avail of lower interest rates on a home loan.
- Don’t open credit accounts: Try to avoid making big-ticket purchases on your credit card before applying for a home loan. It will affect your credit score. Poor credit scores will be unhelpful when negotiating for lower interest rates from your lender.
- Don’t be hasty: Make sure to evaluate your income and assets before applying for a home loan. You must not be hasty. Plan your home application process and check if you are choosing the best lender and if the loan conditions are in line with your financial needs before moving forward.
Eligibility criteria to apply for home loans
- To avail of a home loan, you must be between 18 and 60 years of age.
- You can be salaried or non-salaried, but you need to have a steady stream of income, or enough assets to repay the loan amount.
- You have to make more than the minimum amount quoted on the lender’s website.
Documents required to apply for home loans
- Signed home loan application form with passport-sized photographs and complete with all your personal and professional details
- KYC identification documents like Aadhar cards, Voter IDs, PAN cards
- Your bank account statements from the last six months
- Salary slips from the last three months if you are employed at an organization and income proofs and Form 16 if you are self-employed as a freelancer
- Your employee ID cards
- Cheque for the loan processing fees
How to apply for home loans online?
- Go to the official website: To apply for a home loan, head to the official website of the bank or NBFC you want to borrow from. Browse their loan options and compare their interest rates with other lenders. Once you are satisfied with your choice, search for their home loan application form.
- Fill in the registration form: You have to enter all your personal and professional details like residential address, annual income, and educational information in the home loan application form. You also have to submit KYC identification documents and address proofs like an Aadhar card, PAN card, passport, and the like to proceed with your home loan application.
- Undergo verification: When filling in your contact number, the website will verify it with an OTP. The loan disbursers will also verify your documents, run background checks, and check if all your information is updated.
- Choose the loan details: The next step in the home loan application process is to choose the type of home loan you want to take, your property details, loan tenure, interest rate, and other details. Home loans last for around 15 to 20 years, so make sure to evaluate your present stream of income, check your emergency funds, and other debts, and choose a loan amount that you can pay off comfortably.
- Fill in professional and financial details: You also have to submit other documents like salary slips and income proofs and enter information about your profession. Next, you have to enter your bank account statements. This step is necessary for the lender to evaluate your repayment capability.
- Pay the processing fees: Most lenders charge a small number of processing fees to accept your home loan application. Make sure to re-check all the information that you filled in for any errors and submit the application.
- Go through the approval process: Reputed financial institutions like ApnaPaisa are known for their quick loan disbursals with minimal paperwork, hence you must choose a well-known lender to avail of a home loan quickly. The lenders will then examine the site, conduct property checks, and technical checks, and go through the legal documents.
- Sign the agreement: If your application has no errors and you have excellent credit scores and a steady stream of income, your home loan request will be approved. You can sign the agreement and make preparations to own your home.
Overall, a home loan is a major financial decision that requires considerable planning. Make sure to compare the interest rates and loan terms from various lenders. Your home loan terms must cater to your financial needs and long-term goals. Consider your income sources and ensure that you have enough money to pay off the monthly settlements. If you plan carefully and do not rush through the process, your home-buying experience will certainly be a rewarding experience.