Festive season is almost at the doorstep and it is time for the Indian households to take some big financial decisions. This time of the year is auspicious in our country and it is no secret that we are known to spend big every festive season. The Indian market is designed in a way that every festive season there is a sudden rise in sales across all sectors, be it real estate, automobile or any other industry, we Indians love to go big every festive season. Many of you must be saving up your hard-earned money for this season to arrive so that you can start planning on your future dreams, who knows? Maybe a dream house?
Owning a house is probably the biggest decision you will ever make, we all dream about living in our own house, no matter how big or small your house is, we need at least place in this world we can call our ‘home’.
If you are a first timer then this one is a must read for you, it is very important that you know in and out of this whole process because it is a long term investment and is a very steady procedure and should be dealt with a very practical approach. So, let’s find out what all you need to know before you apply for a home loan.
TYPES OF HOME LOAN
Different types of loan with unique structures are available in the market:
FIXED RATE- In case of a fixed rate loans, the interest rate is fixed at the time of disbursal of loan and is constant through out the whole tenure of the loan.
FLOATING RATE- In case of floating rate loan, the interest rate is based on the reference rate of the lender and changes over the tenure proportionately with change in the reference rate.
MIXED RATE – This type of loan is a combination of fixed and floating rate of interest, so one part offers fixed rate of interest and other part offers floating rate.
FACTORS THAT EFFECT YOUR HOME LOAN
PRE-APPROVAL – It is always advised that you must always look for a home loan that is pre-approved. Pre-approval is secure because it helps you decide your budget. This ensures that you can spend your time looking for a property that suits your pocket and you get a better deal while doing a negotiation.
LOAN TO VALUE RATIO – Loan to value ratio is the proportion of the amount that your bank/lender has agreed to finance excluding the down payment which you will have to pay. According to RBI guidelines, banks can finance up to 90% of property value for loans up to INR 30 lakhs. If your loan is more than INR 30 lakhs and goes over INR 75 lakhs, LTV ratio can come down to about 75% to 80% respectively.
INTEREST RATE – Interest rate can vary between 9% to 12% depending on the lender, however a small difference in the interest rate can have a significant impact on your loan therefore, it is very important that you keep a watch on the interest rates of various lenders in the market and choose the one that offers the lowest .
CREDIT HISTORY – One of the most important factors that effects your loan repaying ability is your credit score. A low score may showcase a negative picture to the banks/lenders and may reduce your chances of getting a loan. The importance of a good credit history is a bit relaxed in case of home loan but then it may lead to higher interest rates or a lower loan to value ratio.
LOAN TENURE - Different lenders may offer different loan tenures depending on the loan structure. Many banks/NBFCs may offer loans for up to 20 years while in many banks the tenure can go up to 30 years, so doing proper research is essential, it will help you choose the loan tenure that eases out the stress of repayment.
LOAN PROCESSING TIME – Processing time can also vary from lender to lender, look for a faster disbursal based on the urgency or requirement.
EMI CALCULATOR – In this digital world, technology has become so advance and practical that you hardly must move out of your comfort zone. You can just visit a comparing portal that is trustworthy and calculate your EMI with the help of an EMI calculator. You can calculate your EMI here.
Now that you are familiar with the types and factors that have an impact on your home loan, it is important to check the eligibility. Lenders will assess your ability based on your income, repayment capacity, age, qualification, financial status number of dependents and job stability. Make sure that you fulfill each criterion and have all the documents necessary to apply for the loan.
List of documents which you must have to qualify:
· Application form duly signed
· Processing fee cheque
· Property documents
· Name & date of birth proof
· Any one address proof
· Signature proof
· Identity Proof
· Income documents:
Salary Slips, Form 16 and bank statements (for salaried)
ITR with financial documents and bank statement (for self-employed)
Acquiring a home loan van be a complex procedure and requires thorough assessment because it is a decision that may last a lifetime. It is important that you stay updated with all the necessary information about an investment this big. If you want to check out the best deals on home loans, click here.
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Till then…happy buying!
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