5 Must know Home Loan Tips:
A home loan is a bare essential for one to buy a home even if you have the money to buy your home out of your own funds. Locking your own capital is not a great idea and procuring a home loan is the best option available as own funds can be utilized for emergencies, contingencies, retirement or even invested for higher returns. Although you may require a loan to buy your home, the banks have their own ways and methods which they apply while lending. It is always wise to know about the essentials of home loan and the basics before applying for a home loan. Here are five points that you must know in order to procure a home loan easily.
1. Job or Income Stability
Although your net salary, expenses, savings, spending patterns, and history are taken into consideration to come to the EMI that is permissible, leading to the loan you are eligible for, the job stability is of utmost importance. Banks consider 40 to 50% of your net income as savings or surplus which you can pay for the EMIs. As a home loan is a long-term liability, the ability to pay the home loan for long is an important criterion and for that, the stability of your job becomes equally important. Just before taking the home loan, make sure that you don’t change jobs and you are in the present job for a substantial period.
2. Your Credit Score is Important
There are many credit scoring organizations like CIBIL, Equifax, CRIF, and Experian that provide credit scores of any individual. These bureaus take into account all your credit transactions and come to your credit score on a scale of 300 to 900. The credit scores are assessed on the basis of your loan history, credit history, repayment patterns, and many other parameters.
Before applying for a loan you can also check your CIBIL score or credit score from www.cibil.com and if the scores are low, there can be measures taken to improve your CIBIL score. However your credit or CIBIL score needs to be 700 or more to be called a healthy score and if it is lesser than 500, it is surely a poor score. In case your credit scores are low clean up your loans and credit cards. If you pay any EMIs, see that they are at least reduced to show that you have more disposable income.
3. Know about the Interest Rates
Carry out a research and due diligence about the interest rates of various banks and find out the rates at fixed and floating rates of interest. A fixed rate of interest remains the same throughout the whole tenure of the loan but the floating interest rate keeps on changing depending on the market fluctuations. Although the floating rate of interest may exceed the fixed rate of interest at times, the amount that you need to pay at a floating rate of interest is lower than the fixed rate of interest. Over and above that, the fees and charges that the banks levy should also be known to you like loan processing fees, penalty, service tax, verification charges, conversion fees, etc.
4. Tenure of the Home Loan
The longer the tenure, the more would be the interest rate and thus it is recommended to keep the loan tenure shorter so that you don’t end up paying more interests. However the banks would always calculate the maximum loan tenure till your retirement age, the goal should be to keep it as less as possible.
5. Home Loan Documentation
It is recommendable to read the terms and conditions in the loan agreement before signing the dotted line. Lack of prior knowledge about the home loan terms and conditions can put you off guard and make it difficult for you to pay the extra amounts that the bank charges.
Keeping the above basics of home loan in mind would not only make you well informed but you would be able to plan your finances properly leaving less room for financial stress.
Key Takeaways of Home Loan Tips For Home Buyers in Bangalore
- A home loan is a bare essential for you to buy a home even if you have the money to buy your home out of your own funds as locking your own capital may not keep anything left for emergencies, contingencies, or retirement.
- Although your net salary, expenses, savings, spending patterns, and history are taken into consideration to come to the permissible EMIs, leading to the loan you are eligible for, the job stability is of utmost importance.
- The credit bureaus take into account all your credit transactions and come to your credit score on a scale of 300 to 900 which is assessed on the basis of your loan history, credit history, repayment patterns, and many other parameters.
- You may have to pay lesser at floating interest rates than in fixed rate of interest and the longer the tenure, the more would be the interest rate and so it is recommended to keep the loan tenure shorter so that you don’t end up paying more interests.
SEE ALSO: Comprehensive Guide for Home Buyers