Buying a home involves a big commitment and requires proper planning. If you’re getting ready to avail a housing loan in order to buy your dream home, compare the available home loan offers from financial institutions first. This way, you can opt for the best and most affordable home loan rates. Apart from this, there are other factors to consider before you apply for a housing loan. Read on to know more.
Know your housing loan sanction and EMI
Availability of a housing loan does not mean that you will get the entire amount you need to make your home purchase. Instead, you will get around 80% to 90% of the total cost of your home. The balance 10% to 20% of the amount is the down payment that you will need to make. This amount is also referred to as the margin. Plan this beforehand as a higher down payment makes repayment easier and also reduces your EMIs.
Your EMIs are another important component of your loan planning process as this is the amount you will pay every month in order to repay your loan. Remember, your housing loan EMI comprises a part of your principal loan amount and a part of the interest you owe. Ensuring that this is affordable can help you make repayment stress-free.
Depending upon the repayment tenor you select and the ongoing home loan rates, lenders will bring you home loan offers. Based on these, you can compute your EMIs using the handy online EMI calculator to decide on the most affordable offer.
Check your eligibility for the housing loan before applying
Both banks and non-banking finance companies (NBFCs) have a set of parameters on the basis of which they evaluate your eligibility for a housing loan. When you apply for a loan, you must meet that eligibility criteria, which takes into account your income, age, location, CIBIL score, and nature of work.
After your initial verification, the lender will evaluate the titles and the documents of the property to give it clearance. They will first check whether you are purchasing a resale property or a new one. Next, they will request the builder or the existing owner (in case of a resale) to furnish the required property documents. In case of an under-construction property, they will check the construction details and counts in the track record of the builder before approving the housing loan request. If everything is in order, you will get a stamp of approval on the property papers and the lender will compute the final housing loan amount that you are eligible to borrow. This process is known as credit appraisal.
So, ensure that there are no problems with the paperwork relating to your home and make sure you have all the documents you need for quick approval on your home loan.
Know your housing loan disbursement process in detail
Once approved, the housing loan amount is disbursed to you either in full or partially as per the loan agreement. When your entire loan amount is paid at one go to the seller, then it is regarded as full disbursement. In this case, the cheque is issued only when all the required documents have been submitted and approved and the down payment has been made. In case of a resale, the cheque is issued in the seller’s name, while in case of a fresh purchase, it is issued in the builder’s name.
If you are purchasing an under-construction property, the lender will release the loan amount in parts depending upon the construction completion stage. This is known as partial disbursement. For instance, a 20% payment will be made when the first level of construction is completed and on the completion of another portion, the lender is likely to release 30% more funds. Loan disbursement is the last stage, completing your loan application process with your lender. Ensure that you know these stages and plan repayment keeping this in mind, so you are not taken aback at any stage of repayment.
All in all, understanding home loan offers, the home loan eligibility criteria and other terms and conditions is the most important step in your journey towards becoming a homeowner. Research and understand every detail of the housing loan you are applying for in order to make an informed decision. Ensure that you have a good credit history and a high CIBIL score as that increases your chances of getting access to pre-approved home loan offers.