Buying a house is something we all want to do. It’s one of the ultimate forms of ensuring that you have a secure and safe life. But before you start applying for it, there are some Home Loan factors that you should be aware of.
The loan amount is the total amount that you want to borrow from the bank. This is what you’ll be paying back in installments, with interest.
Generally, banks will ask you to pay a fraction of the amount at the time of purchase. This can be anywhere around 15-30% of the total cost. It’s better to choose a bank that asks for a smaller amount, since that can ease up your personal finances as well.
Home Loan Eligibility
The Eligibility criteria of Home Loan application is dependant on an individual bank’s policies. But there are certain criteria that are universally followed. Here are some that you need to be aware of.
- Good credit score
- Positive Income vs Expense ratio
- Nil/minimal debts to be paid
- Regular Income(self-employed/salaried)
This refers to an applicant who is applying for the loan with you. A co-borrower can be any family member that is closely related to you. This includes people like your spouse, father, mother, or siblings. They can even be other relatives, provided certain conditions are met.
Applying with a co-borrower who meets all the eligibility criteria increases the approval.
Combining two salaried persons as co-borrowers in an application increases the chances of approval since salaried employees are preferred when the bank looks at co-applicants. You can also stand to get a higher loan amount from the bank, since more people who are working means that there’s more money that can be paid back in the same amount of time.
Type of Interest Rates for Home Loan
There are two types of interest rates for Home Loans. They’re fixed and floating rates.
Fixed Interest Rate
As the name suggests, the rate of interest remains fixed throughout the duration of the repayment period of the loan. On average, interest rates for Home Loans can range from 9-9.5%.
Floating Interest Rate
Here, the rate of interest isn’t a fixed number. It keeps changing based on the RBI and their policies.
Generally, floating interest rate tends to be lower than fixed rates. But there are some that prefer to keep it constant for their convenience.
Banks charge a processing fee to carry out loan processing. This fee can be negligible or even non-existent in some banks. Take this into account when you’re choosing a bank for a Home Loan.
Home Loan Tenure
The tenure period for a loan is left to the applicant. You can choose short-term tenures like 8-10 years or go for a long-term payment like 20-30 years. The catch here is that, the longer the tenure you choose to pay, the more money you lose through interest. But the EMI (Equated monthly installments) reduces as the tenure increases.
You should be wary when choosing a Home Loan tenure. Ensure that the total interest amount paid is feasible. You don’t want to lose out on a ton of money just because you’re paying a small installment every month. Find something that suits you, and stick to it.
Home Loan Application
Home Loans can be easy to apply for if the Home Loan eligibility criteria are met. Talk to your bank and see what the necessary procedures are before you get started with your application. It can save you a lot more time than rushing through everything with half knowledge.
Before choosing a bank, make sure you’ve made a comparison between them. Each have their own strengths and weaknesses, and all of them offer different features that can be interesting to avail. Low interest rates aren’t the only thing that you should be thinking about. Choose the bank whose terms suit you best. You can find certain conditions suitable to you for Home Loan application when compared to another bank.
Once you get in touch, a bank representative generally helps you and makes sure all formalities are completed with no hassle.