Considering a Home Loan? Keep an Eye on the Do’s and Don’ts

Searching for that perfect home can be a fun and exciting experience, but getting a home loan to fund it is a whole new ball game. Choosing the correct house loan is just as important as finding the right home.

A home loan can help you get adequate funds to finance your house, but you must be cautious as it’ll be one of the most important financial decisions you’ll ever take. Before applying for a home loan, you must consider a number of factors and then make an informed decision. Read on to know what some of these important factors are.

1. Increase your home loan eligibility

Your home loan approval and disbursal depends on your eligibility to take one. You can get a rough idea about your eligibility by calculating the EMI amounts you’re liable to pay. However, remember that your salary, which includes basic and dearness allowance, and your current liabilities are also considered before a lender determines your home loan eligibility.

Apart from your financial situation, there are other factors like your profession, employer, age, and the number of dependents, which are taken into consideration by the lending institution.

To up your eligibility level, you can add your spouse or a parent, whoever is earning, as a co-applicant. You can also try and clear off your existing debts to further increase your chances of getting a home loan.

2. Choose your loan type carefully

Home loans either have a fixed or a floating rate of interest. A fixed interest rate is not affected by market fluctuations while a floating interest rate varies as per current market conditions.

A fixed interest rate is always slightly higher than a floating one, but it offers stability and security from vulnerable market conditions. But, they can be a huge disadvantage if they come with a revision clause, which means they’re at the discretion of the lending institution and can be revised at any time.

When choosing a home loan, be cautious about the interest rate type and always go for the lowest home loan rate of interest.

3. Negotiate the interest rate

No matter which interest rate you choose, you should always remember that you can negotiate it, especially if you’ve been an old customer of the financial institution and possess a neat track record. Though lending institutions are in charge of deciding the interest rate, you can bargain if you have a good credit history.

Keep your credit history in top shape and always clear your existing debts before opting for a new one. Remember that a good credit history means good business for lenders.

4. Don’t get a new credit card or another loan

If your loan has been approved or is in the process of being approved, refrain from getting a new credit card or another loan. A new loan or credit card can affect your credit ratings, which can delay your approval.

Getting a new loan, at this point, may lower your eligibility for the current one and affect the final loan amount. Hence, it’s best for you to steer clear from applying for a new credit card or loan.

5. Don’t skip an EMI or make late payments

If you have existing loans, try and pay their installments on time. Failure to repay existing loans can affect your credit score, which is bad news for your home loan approval. The same applies for credit card payments or other debts.

Sticking to these points will help you secure a home loan from a number of financial institutions. So, follow this list of do’s and don’ts while taking a loan, and get that dream home you’ve always wanted.

Tags: Credit history, Credit score, home loan, Mortgage loan

Category: Mortgage