Are you planning to get a home loan to fulfill your longstanding dream of owning a house? We understand. Getting a home loan for the first time can be a very confusing and stressful process. Before we delve into the specifics of home loan, it is important to understand that taking a home loan is a long-term commitment till you repay the whole amount. This article will help you understand all the things that you should keep in mind before committing to a home loan. 

1. Eligibility Criteria for Home Loan 

This is the first step, where the home loan financing companies or lenders check your eligibility for the home loan. To check your eligibility for the loan, lenders check your income, repayment capability, ongoing EMIs, age, CIBIL score, job stability, and even your spouse’s income. 

Different Types of Home Loans 

There are two types of home loans, fixed rate loans and floating rate loans. It is important to understand the difference between these two loan types because it directly relates to the amount of EMI you will have to pay during your tenure. 

Fixed Rate Home Loan 

In this option, the amount of interest rate is fixed throughout the tenure of repayment. For instance, if your EMI amount is Rs.50,000 per month, then you will pay the same amount for the whole repayment period. Choosing a fixed rate home loan gives home loan borrowers stability and predictability. 

Floating Rate Home Loan 

In this home loan option, the interest rate can change depending on the lender’s benchmark rate. If the benchmark rate changes, the interest rate could also change accordingly. There is an advantage and disadvantage to choosing a floating rate home loan, that is if the benchmark rate falls, it will also reduce the floating interest rate. However, if the benchmark rate goes up, it will also increase the floating interest rate, resulting in bigger EMIs. 

3. Look for Pre-Approved Home Loan 

If you have a strong CIBIL score, or good relationship with your lender, then we would strongly advise you to look for a pre-approved home loan. There are many benefits for opting for a pre-approved loan. First of all, pre-approved loans are generally offered at a lower interest rate, minimal documentation is required to avail the loan, and low processing time. 

Another big advantage of having a pre-approved loan at your disposal is that you can negotiate with the developer on offering you the property at a better rate and even close the deal faster. Moreover, many home loan lenders have a list of developers empanelled with them, which means lesser documentation and faster processing with the assurance of quality projects. 

4. Loan to Value Ratio 

What is Loan to Value Ratio? 

Loan to value ratio is the estimation of loan amount offered against the actual (current) property cost set by the developer. Home loan financing companies or lenders take factors such as repayment capability, income, ongoing loans, risk appetite, etc. to determine how much amount can be offered as loan against the actual value of the property. 

Generally home loan lenders offer a loan up to 90% of the property. Your income and your repayment capability are some of the key factors that can impact the loan-to-value ratio. However, there is a way, by which you can get a higher loan-to-value even if your income is less or if you have lower repayment capability, that is to add your earning spouse, parent or adult child as your co-applicant while applying for the home loan. If you want to learn how much loan amount you are eligible for, you can contact your trusted home loan provider.

5. Home Loan Charges 

Knowing just the interest rate of the home loan is not enough. There are many other charges that you should know about before applying for the loan, mainly because the amount of loan is big and so the charges that come with the loan can increase the loan cost. 

These charges include processing fees and administration fees. Also enquire about the prepayment charges, as it can vary from bank to bank. In case of home loan, many banks offer zero prepayment fees, however the duration from when you can start prepayment can vary. Another charge that you should know about is the loan transfer fee. If you get an offer from a lender that allows loan transfer, offering a lower interest rate, you can consider the option to enjoy reduced EMIs for the remaining tenure. The loan transfer fee also varies from lender to lender.

6. Tenure of Loan Repayment 

You can avail a repayment period of up to 30 years. At times, the repayment period is also subject to the eligibility of the customer. Make sure to choose the repayment period carefully. There are a few things to consider while choosing a repayment tenure. If you choose a longer repayment period, the EMIs will be lower, however you would have to pay more interest amount (in total). If you choose a shorter repayment period, your loan would end soon with you having to pay a lesser interest amount, however the EMI amount would be larger. So, make sure that you choose a tenure that best suits your repayment capability. 

7. Which Documents Would I Need to Avail a Home Loan?

Here is a list of documents that you should have to submit to avail a home loan: 

• Identity and address proof such as Adhaar Card, Voter Id card, etc. 
• Salary Slips of 3-6 months and Income Tax Returns of 3 years if you are self-employed
• Property documents including the title deeds, agreement to sell, etc. 

The lender may ask for additional documents to furnish the loan, so make sure to ask in detail, and prepare all the documents beforehand, so that there is no obstruction while applying for the home loan. 

8. Late Payment Fees 

Lenders charge late fees when there is a delay in EMI payment. So, first of all make sure that you are never late on the payments. Secondly, when EMIs get delayed it also affects your CIBIL score, hampering your credibility to avail loans. Keep in mind that late payment fees are a percentage of the amount overdue, which further gets added to the outstanding amount. 

Also, in case due to financial emergencies you miss paying EMIs for more than 3 times, then the lender has the power to take action without the intervention of court. In such a case, the best possible way is to get in touch with your lender and let them know your situation. Your lender can help you get a grace period or extension on the repayment tenure. 

9. Home Loan Insurance Cover 

In an unfortunate situation of your demise, the burden of loan will fall upon your family. This is why it is very important that you take out a loan cover term insurance plan so that the loan gets covered and your family stays free from the liability of the outstanding loan. Many lenders offer many attractive insurance schemes while applying for your home loan, and you must consider taking one to keep your family secure and stress-free. 

Keep these things in mind and you will never face any hurdle in availing a home loan. If you are planning to buy a property in Gurgaon, Noida, or Pune at the prime locations of the city, and looking for a real estate company that could take care of the loan offer part for you, then visit just Inframantra. Explore a wide range of properties or just talk to an Inframantra property expert and get the best deals without having to pay any brokerage. 

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