A home loan is an affordable way to buy your dream house. Getting a home loan is a simple process. Compared to other types of loans, a home loan has longer-term and includes a larger amount. That’s why you should research the loan terms and conditions before settling the deal. Then, you must use the online home loan calculator to find the best deals on housing loans.
In the meantime, let’s check out the common mistakes homebuyers should avoid when applying for a home loan.
1. Not Comparing Offers
Banks have different offers on home loans. Every bank has varied:
- Interest rates
- Repayment term
- Eligibility criteria
- Processing fees
Just because you are in a hurry doesn’t mean you should get a home loan from any random lender. Instead, research well and get a loan from a bank that offers the best interest and a flexible repayment plan. Use a home loan interest calculator to compare interest rates. You can also call the banks to ask about the processing fees and tenure.
2. Not Checking the EMI (Equated Monthly Instalments)
EMI is the monthly instalments paid to the bank. The EMI varies depending on the term of your home loan. If the loan has a longer term, you will pay a smaller EMI. Short-term loans (the ones that are to be paid within 5-10 years) have a large EMI. You should check the EMI and compare it with your repayment capacity. Get a loan only if you can afford the monthly loan payments.
3. Not Checking Your Credit Score
It is a 3-digit numerical value that shows your creditworthiness. Banks check your credit or CIBIL score to understand your credibility. It is calculated based on your past debt repayment records. The score can be anywhere between 300 and 900. You need a good credit score for a quick home loan application approval.
Always check your credit score before applying for a housing loan. It is available for free at www.cibil.com.
4. Not Having Enough Money for the Down Payment
Bank asks you to pay a down payment – 10% to 20% of the total cost of the property. After that, banks pay up to 90% of the cost of your property while you pay the rest. Your home loan application is accepted only when you have enough funds for the down payment. So, check if you can arrange the down payment before applying for a home loan.
You only repay the amount you borrowed from the bank. For example, the 10% of the amount you paid from your pocket as the down payment is not included in the loan balance. You only repay the 90% borrowed amount.
5. Getting Home Loan at Higher Interest
Always use a housing loan interest calculator when applying for home loans. Banks offer home loans with fixed-rate and floating-rate interest. The fixed-rate interest is a good option for borrowers who want a stable interest rate throughout the term. The interest does not remain the same in the fluctuating-interest loans.