Buying a home is one of the main financial decisions for an average Indian household. The only way most first-time homebuyers can keep their ownership dreams alive is by availing a home loan. Mostly, it is easier said than done. It is a tedious task to get a home loan sanctioned. There is a lot of paperwork involved, which encompasses long procedures.
It is essential to get familiar with basic requirements, to avoid overpaying for the loan. You should know such things as it will be a commitment for years, where you will pay monthly EMIs for your home loan.
Here are certain things you should know before applying for a home loan:
- Type of Home Loan
There are usually three types of home loans that banks provide. You can also find them at any financial institution offering loans.
Fixed-Rate Loan: In this type, the interest rate of the home loan that you take will remain the same for its entire duration.
Floating Rate Loan: In this type, the interest rate of the home loan you take varies according to the lenders’ set benchmarks, which usually varies every year or every other year.
- Eligibility Criteria
It is an essential thing to do before applying for a home loan. You can check your CIBIL score or contact your bank to know if you are eligible for a home loan and what amount you can get under it. CIBIL score is a credit score that tells a person’s creditworthiness using various parameters in the form of a 3-digit number. The bank or any lender will assess your loan repayment abilities based on various parameters like monthly income, prior loans, and other expenses. Age also plays an equally important part in determining the eligibility for a home loan.
- Home or Loan First
It is a dilemma often found in first-time homebuyers as they are unsure of whether to take a home loan first or the property first. If you are confused about the choice, consider taking a home loan first as it will set your budget for your new house. In this way, you won’t go overboard when choosing a house or overpay for it. There are some projects that a few banks have already approved, which can save you from many hassles.
- Cost of Your Home Loan
Home loans range between 75 to 90 percent of the total value of the property. You can check your eligibility online with the help of calculators. When you consider taking a home loan, you should also check its cost. A typical cost of a home loan includes interest payments, penalties, processing fees, and administration charges. Other charges vary according to the type of loan you have chosen. Although all such information is made available by lenders on their websites, you should read the documents and ask them questions to know of any hidden charges.
- EMIs and Tenure
Home loan tenure depends upon your type of loan, the lender, and the repayment amount. EMIs are monthly instalments you pay to your lender against the home loan, which includes repayment of principal amount and interest of the remaining total amount. If you want to have lesser EMIs, you can opt for longer tenure loans. To calculate the principal amount and your monthly repayments, your bank may need a specific set of documents, including KYC, income proof, and property papers.
- Insurance Cover
Insurance for your home loan is essential as it will cover your family against outstanding loan payment during unfortunate times. You may want to take home loan insurance cover to save your family from greater liabilities of the future. Some lenders also provide this facility.
Apart from the above points, you should also keep in mind to choose a reputable bank like Axis Bank to get home loans at competitive rates and many other facilities. The bank provides attractive interest rates, doorstep service, and much more to its customers.