10 Things to Consider Before Taking a Home Loan

Buying a residential property as a primary residence is a major decision which impacts you and your family’s lives. Keep in mind that residential property prices are increasing and that your decision may be just a once in a lifetime one. If your savings are not enough to bear the total cost of the property it is necessary to obtain a home loan. Before applying for a home loan, you must consider few vital things:

  1. Do Market Research – Initially, you should do the market research using your own intellect. You can seek advice from a home loan adviser. The combination of your research data and your adviser’s advice will provide you with adequate knowledge of the home loan process.
  2. Review Interest Rates – When it comes to home loan interest rates, it is always true that lower one is always better. Affordable housing will be a reality for you when you tap on the right lender offering the best rates. Additionally, if your mortgage company offers discount points to lower your interest rate, consider doing so to save a substantial amount of money over time.
  3. Check Your Home Loan Eligibility – This is one of the vital facts to consider when you want to procure a home loan. By eligibility, we mean the borrower’s ability to repay the loan. It may be the case that your sole income is not enough to get the amount of money that you desire. Here you may need to include your spouse’s income as well. So, look for a sensible amount to borrow which you can repay on time while successfully maintaining your family’s lifestyle.
  4. List the Documents for Your Home Loan Application – In most of the cases banks and financial institutions provide a checklist with a loan application form. You need to go through the list and attach the mandatory documents, which are essential for the loan process. You should be ready to share additional documents which may be requested by the bank to decide the proper amount and your respective eligibility.
  5. Sanctioning – A home loan applicant’s credit history and net monthly income play a very significant role in deciding the sanctioned amount. It will be advisable to get your credit history report in advance before applying for a home loan. If approved you will receive a sanction letter mentioning the loan amount, tenure and interest rate. If it the loan is not approved you will also get a letter with valid reasons for disapproval.
  6. Loan Disbursement – After the property is finalized you will get an offer letter or a letter of approval from the builder or reseller which you must sign. You need to make your share of the payment to the seller or builder and take a receipt of the same to be produced to bank for disbursement
  7. Applying for Home Loan - Real Estate FinancingEMI Affordability – EMI is something in home loan which is most important from buyer’s point of view. EMI needs to be paid monthly for loan repayment for the specified number of years. The EMI should not exceed 40-45 % of your net monthly income.
  8. Benefit on a Home Loan – Will there be any benefit or any other fee waiver for obtaining a home loan? Are there any complimentary appraisals or discount in home inspection fee? Take a note of this.
  9. Prepayment & Closing Before Time – Partial prepayment is a part of the principal amount payment by the borrower in addition to monthly EMIs. Prepayment of a home loan reduces the amount of interest paid to the lender. Will your lender allow pre-closure of the loan? Understand that it is always advisable to close off a loan to save interest if you have the funds available.
  10. Cost for Pre-Closure or Prepayment – What will be the charge to close the home loan before time?
    The above 10 points are extremely important to consider before applying for a home loan.