At last, you’ve found a place that fulfils your idea of the perfect home? Now you will need preparation for home loan?
What you need now are the funds to buy your home. Where it will come from?
Home loan can help you with that.
And now, it’s even easier to apply for a home loan, with many banks and NBFCs offering the facility to apply online.
But before you apply, you need to think of aspects like:
- Loan amount,
- Interest rate, and
You also need to explore your loan options and choose the loan provider whose terms suit your needs.
Then there are the documents required for home loan that you need to take care of.
Preparing for a Home Loan Application
The Internet has opened up new avenues that you can use to get a quick and easy home loan apply online.
You can visit the websites of various lenders and review what you need.
You must also review how much you can pay as EMI.
Other constraints needs checking before you approach the loan provider.
#1. Compare Home Loans
Third party websites offer information on home loan offered by banks.
You can do a detailed comparison of the loan terms sitting at home.
It is essential to select the right offer for yourself.
So, before making a final decision, visit these financial websites and get all the details.
#2. Type of property & linked loan
Check to make sure that all the necessary documents are ready before you choose the property to buy.
If you’re buying an under-construction property, make sure that the project been approved by the lender you’re considering for the loan.
You should also check the approval status of the particular unit you are buying in an apartment complex.
Builders sell units on:
- Construction Linked Plans,
- Time Linked Plans, and
- Subvention schemes.
Construction Linked Plans (CLP) require the loan to be released at various stages of the unit’s construction.
Most lenders sanction loans easily for this sort of plan than the other options.
If you are buying a resale property or a ready to move-in home, the title deed and other documents need to be in order.
If it’s for the construction of a house on a plot you own, you need to have the title to the land and approved plans for construction.
For flats or independent houses/villas in residential complexes, you need to be clear on what the lender will consider as the actual cost of the unit.
Most of the time, the cost of the house or apartment you are buying and possibly the parking facility cost is considered.
Expenses like club membership and maintenance charges are generally not taken into account.
#2. The Loan Amount
Once you pick the financier for your home loan, you need to decide on the amount you want to apply for.
Generally, lenders won’t cover the exact cost of the property, but provide 80% of the assessed value.
They’ll also look at your basic income where perks like:
- Medical allowance,
- Travel allowance, and
Performance bonus will not be considered as part of your salary.
Evaluate what you can afford while deciding on the property to purchase.
Since you would have to deposit around 10% to 20% of the loan amount as down payment.
Hence affordability study is essential.
Also, consider how much you can afford to pay as EMI each month throughout the tenure of the loan.
#3. The Loan Tenure
One way to afford a larger loan is to opt for a longer tenure.
But this impacts the total amount you will end up paying to the bank.
If you take out a loan for a tenure of 20 years, rather than 15, you might get a lower EMI.
But your interest alone could add up to more than the actual loan amount when calculated over a 20 year period!
The shorter the tenure, the lesser the interest and the lower the total amount you’ll have to pay to the lender.
So, if you can afford a bigger EMI, why opt for a longer term with more interest?
Opt for the shortest tenure that you can afford and lower the actual cost of the loan.
#4. Interest Type: Floating or Fixed
You can choose to opt for a floating or fixed rate of interest on your loan amount.
Floating rates vary with the fluctuations in interest rates according to market trends.
While the same suggests otherwise, the fixed rate is not really fixed either.
Banks reserve the right to revise the interest rate after a few years, or if there is a sharp increase.
In this case, you would be affected by the rise in interest rates any way.
If you opt for a floating rate of interest you’ll be able to take advantage of lower interest rates when they occur.
So when you make your decision, consider choosing between fixed EMIs for years or fluctuating EMIs with the possibility of lower payments.
#5. Charges and Penalties
Besides the EMI, you will incur charges like:
- Processing fee,
- Stamp duty, and
- Other initial charges when you finally start making payments.
Most banks provide home loans without foreclosure charges but check with your lender to be sure.
If you opt for floating-rate interest loans, you’ll most likely be free from prepayment charges.
This is advantageous because when you’ve got the funds in hand, you can pay off a lump sum when the interest rate is low.
If you default on EMI payments, the lender might levy a penalty.
They can also ask you to provide additional security if the price of your property falls during the duration of the loan.
Be sure to read the fine print and try to avoid loan offers with such clauses.
If you’ve got a good credit history and rating, it’s likely that your loan request will be processed quickly.
You’ll also be able to negotiate for better loan terms, like a lower interest rate.
#6. Essential Documents
When you apply for a loan, you’ll need to supply various documents through the approval process.
Some of the important documents include:
- Identity verification,
- Employment and income poof,
- Age proof,
- Address verification, and
- Bank statements.
Once the bank approves the loan, you’ll need to provide documents related to the property you are buying.
If you provide all the required “home loan documents” as and when needed, it will speed up the approval process.
You will get the loan amount quickly.
Consider all these details before you apply for a home loan online.
Be thorough in your research to find a home you will love.