How to Apply For a Low-Interest Home Loan
The interest rate on your housing loan will depend on the prevailing market rates, your credit rating, and the terms of your loan. Usually, the stronger your credit score, the better will be the terms of your Home Loan.
And the lower will be the interest you are offered. You must also consider the two main types of interest rates for Home Loans: fixed and floating.
Before you submit your application, figure out exactly what kind of Home Loan you want based on your buying power. Let’s look at what you need, to get a Home Loan at the lowest interest rates.
Credit score
Your credit history will reflect your financial discipline before the lender. It will help indicate whether you can repay the loan on time.
Your credit history is a chronicle of all loans, credit cards, overdrafts, mortgages, and defaults (if any) over the years. If you have a good repayment history, you stand a greater chance of getting a Home Loan at a lower rate.
Repayment Ability
Your lender may look into the following criteria to offer you low interest rates:
- Is your income stable and is it likely to continue?
- Do you have enough income to meet the Home Loan expenses?
- How much is your debt-to-income ratio?
- Does your current lifestyle permit you to hold a savings pattern for unexpected expenses?
Some key documents that lending institutions consider include proof of income and tax returns. You may also need to submit evidence of other income sources to stand a better chance of enjoying the best Home Loan interest rates.
Pre Approved Loans
A pre-approved Home Loan is a full-service lender, provided after a basic analysis of your financial situation. It proves that a lender is certain of your ability to be granted a Home Loan based on the data you have provided.
This data would include your income, creditworthiness, and financial position. Though it is a key element in getting the loan sanctioned faster, it does not guarantee a lower interest rate.
In some cases, despite a preapproved Home Loan, the lender may refuse to grant the loan. This may happen in case the property titles are unclear.
It could happen in case the ownership structure doesn’t fall within the lender’s prescribed norms. Use an equated monthly instalment (EMI) calculator to understand how much you would have to pay every month based on the interest rate.
Tenor
The term of your Home Loan plays an important role in determining your EMIs. Short-term housing loans have lower interest rates.
They also help cut down the total cost. But then, you will have to commit to higher EMI repayments. Opt for a tenor that matches your budget and needs.
Location of property
The rate of interest varies depending on where you want to buy your property. Is it an urban or a rural area? How posh is the area?
The price of the property as well as the interest level will differ according to these factors.
Down-payment
The higher the down-payment, the lower would be the rate of interest. If you make a down-payment of more than 20% of the price of your home, you may get a low rate of interest. To help you save money, you could try maintaining a balance between the down-payment and the interest rate.
To Sum Up
These are some of the factors you should keep in mind while applying for a Home Loan so that you get the lowest possible interest rates. Assess your Home Loan eligibility and take quotes from different lenders to get the right fit.
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Category: Loans
