Buying a home with a home loan is a wise move. It beats renting or savings to purchase a home. Moreover, housing finance has evolved significantly over the years. Today, you can get financing quickly and easily and at attractive interest rates, making it all the more alluring of an option when considering homeownership. However, before you jump the gun and sign the application form, here are some things you should see to before taking any further steps.
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1. Check your credit score
Your credit scores are vital to your home loan application. Poor scores will negatively impact your experience and could even result in the rejection of your application. So before you make a move on your home loan, make sure you’ve checked your credit rating, looked for errors and tried improving it as much as possible.
2. Save for a substantial down payment
Different loan brackets have different interest rates. The lowest bracket is loans below 30 lakhs, they come with the lowest interest rates. The next bracket is above 30 lakhs and below 70 lakhs, these come with higher rates. Lastly, loans above 70 lakhs have the highest rates. If it is possible, try to save and fall into a lower bracket. In fact, saving for a larger down payment is always worthwhile, it ensures the home loan interest rate is calculated on a smaller loan amount resulting in lower interest payments.
3. Use calculators
There are numerous calculators that you can use before applying for a home loan. They ensure you have the foresight required to successfully apply & repay the loan. You can begin with the eligibility calculator. The name is a clear give away of what it does – tell you the rough eligibility amount. With this information, you can apply without worrying about a receiving that red ‘rejected’ stamp on your application and forfeiting your processing fees for nothing. You can also use the EMI calculator, it will help you get a clearer picture of your repayment journey and allow you prepare for it efficiently.
4. Look for life insurance
It might seem off-topic, but life insurance is one of the most important things you need to buy before applying for a home loan. Why? Well, a home loan is a huge amount of debt. As long as you are around to service the loan, things are fine. But in the unpredictable world we live in, what happens if you’re not around to pay the EMIs any longer? The entire burden falls on your near and dear ones who might not be in the financial position cover the payments. Here’s when a life insurance can some in and provide some solace in trying times.
5. Read the terms
You might think this is a no brainer but you’ll be surprised how many people don’t do so and then find some shocking clause that makes their life miserable. Avoid this by going through the document. It might take you a lot of time and it might not make for fun reading but it will ensure a smooth road ahead. If you notice something that’s not right or some area of concern, get clarity at once and then apply for your home loan. Hope this has been helpful, good luck and congrats in advance on your new home!