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Know these things, before you avail a Home Loan Overview

Buying a residential property is a cherished dream for many. But, arranging for the requisite funds for buying the residential property remains a problem for the majority of potential buyers. Availing a home loan has become an easy route to acquire the funds for purchasing a residential property for the buyers.

Banking and financing sectors are offering many lucrative plans for its customers, to avail home loans on relatively easy terms. Many supportive offers are being made by the Government authorities to make the repayment of the home loan an easy task, especially for female buyers. It all seems fairly easy, but one must be aware of certain things before one decides to avail a home loan, for buying a residential property.

What should you know before you apply for a home loan:

1.Know your Credit Score first-

It is the most important and essential factor a bank considers before deciding in favour of the loan eligibility of the applicant. A prospect must then has to maintain a good credit score, before deciding to apply for a home loan. The credit score has to be more than 750, to avail the home loan and earn better interest rates.

2.Know your home loan interest rates-

This is a very important factor for consideration for every home loan applicant. The applicant must check the applicable interest on home loan, applied for, by the applicant. The applicant must consider different tenders for the lowest interest rates available.

One must also know about the two types interest rates applicable in home loans. These are floating and fixed rates of interests. The EMI does not vary in fixed home loan interest rates, where as in floating rate, the interest rate is calculated based on the MCLR and it changes over time.

  1. Know your Home Loan Tenure-

Deciding for a preferable home loan tenure is very important for the applicant, before she/he decides to avail the loan. The EMIs for loan repayment depends on the tenure of the loan. It is always preferable to opt for a shorter home loan tenure, as it helps in decreasing the home loan cost.

4.Know the loan processing fees-

It is the fees the applicant needs to pay to the lender, the moment the application for the home loan is accepted by the bank. This fee is generally 1% of the home loan amount the bank disburses to the borrower. One should opt for the lowest processing fees.



5.Know your Equated Monthly Instalments-

The borrower needs to pay this amount every month towards repayment of the home loan. This amount depends on the borrower. It depends on the down payment the borrower has made to the bank. It is always advisable that the EMI amount must not exceed 45% of the borrower’s total monthly income.

6.Know your home loan documents-

The applicant must know in detail the documents she/he has to sign, which are related to the home loan. The borrower must be aware of different charges, fees, penalties, mentioned in the home loan documents.

7.Know your Down Payment-       

This amount is generally 10% to 15% of the total home loan amount. The balance amount is converted to the home loan monthly EMIs. If the down payment is increased, it lowers the EMIs. It depends on the borrower’s convenience and availability of surplus cash.

  1. Know your additional charges-

These are charges apart from the EMIs, charged by the lender banks. The borrower must know about all of them thoroughly beforehand.

  1. Know your Pre-Payment Penalty-

This is not applicable as per the Reserve Bank of India directives. The applicant must make sure that the bank does not impose any penalty, in case of the borrower makes pre-payment of the home loan.

10.Know your Foreclosure Norms-

Banks generally charge some penalty in case the borrower forecloses her/his home loan account. The applicant must know all relevant details related to foreclosure of the home loan.

One must keep the above points in mind before availing a home loan and to decide for the right kind of home loan product. The home loan applicant must also buy a RERA approved property.

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