Buying a house is considered to be one of the safest investment options. The purpose of a home loan application could be to secure a long-term living space or simply for investment reasons. Nevertheless, the process of acquiring a home loan is easier said than done. It’s important that you make an important decision, especially when it comes to finances. Here are a few factors you need to consider when you apply for a house loan:
A good credit score and history will make it easier for you to apply for a house loan with lower interest rates. A credit score anywhere between 750 and 900 is considered great for easy loan approval. A credit score ranging from 650 to 750 is considered good, but the lender will inquire regarding your financial status and other relevant factors. Anything below 650 is considered average and will require some effort to improve if you are considering a home loan application.
With the internet at our fingertips, it has become far easier to research the topic of our choice. In this case, it is recommended to perform a detailed analysis of the various home loan options. This will help you settle for the right lender who offers suitable EMI and interest rates. It’s imperative to understand that these details should be clarified before, during, and after the application for home loan to ensure a smooth process.
Concerning the rate of interest, there are two terms that one needs to understand: A fixed vs. floating rate of interest
As the name suggests, a fixed interest rate will remain constant from the moment the loan gets sanctioned, regardless of any changes in the financial market. However, a floating interest rate can change depending on the financial market conditions.
In today’s world, the floating rate of interest has proven to provide the borrower with more long-term benefits, compared to fixed rates, such as:
– Helping in reducing the overall cost for the borrower.
-If the interest rates decline, the borrower will reap the benefits as the floating rate on their loan will also decrease.
In addition, banks also analyze all home loan applicants and understand their employment stability and the number of dependents they have. If a borrower has more number of dependents, the lenders may make an assumption that the loan repayment capacity may be affected due to spending on their dependents; thus, resulting in delayed EMIs. Hence, a stable monthly income and long-term employment are bound to make a favourable impression on the lender for home loan application.
While opting for any kind of loan, be sure to check if the bank allows for a short repayment tenure. It is always advisable to go for a short tenure as the longer it gets, the more interest you will have to pay to the lender. This will increase the overall cost for the borrower.
Home loan borrowers do have the liberty to switch from one lender to another. Be sure to consider it only if the other lender offers a significantly lower interest rate, as a prepayment penalty may be levied by the current lender. Apart from this, other additional costs include a “processing fee” that is paid to the new lender once the shift is made.
To conclude, an application for home loan may seem like a daunting task, but do remember that it will be worth the effort in the long run! If you’re searching for more details on documentation, we have an elaborate property documents checklist that can guide you in the process. Besides, we also have a comprehensive guide on housing loan insurance. Keeping all homebuyers in mind, we also have a blog on NRI Real Estate Investment. If you’re looking to buy a new home, check out our latest cutting-edge project – Sun & Sanctum. Strategically placed in North-East Bangalore, one of the most rapidly growing cosmopolitan neighbourhoods in India, this project perfectly captures the buzz of urban life and the tranquility of nature. Come and live a one-of-a-kind home experience at Sun & Sanctum.