8 Key Considerations for Home Loan Applicants

October 31, 2023

If you want to purchase real estate, you'll probably need to borrow money to pay for it. However, some people are completely unaware of the mortgage process. The stress of purchasing a new home is already high, so not knowing if your loan application will be accepted worsens it. These are eight factors to consider while taking a home loan.

1. Consider Your Financial Capability

The easiest method to achieve this is to have an early discussion with your prospective lender. Your lender will often inquire about your assets, monthly income, debts, and anticipated down payment. The trick is to think like a lender and examine your income, credit history, and debt service ratio as the three factors they consider when evaluating house loan applications.

2. Duration of a Mortgage

The length of your loan is directly correlated with your home loan EMIs. Banks prefer shorter-term borrowers who apply for house loans. You also benefit from a short payback period because it lessens the impact of house loan interest on your Equated Monthly Installment or EMI. As your loan term shortens, your monthly payments will increase, but you'll pay less for your mortgage over time.

3. Select the Best EMIs

You determine the equal monthly installment amount. To accommodate and meet the borrowers' various needs, banks provide various EMI options. The amount of the down payment you make when buying a house also significantly impacts EMIs. Additionally, it is best to ensure that your EMI amount does not surpass 45% of your gross income.

4. Credit Score

One of the most crucial and essential elements banks consider before granting a customer a loan is their credit score. Because a solid credit score is necessary to apply for any loan within the banking industry, everyone interested in getting a house loan should keep one.

To be eligible for a house loan and receive lower interest rates, you must have a CIBIL score of at least 750. Making prompt payments on your credit cards and outstanding loans is the easiest way to keep your credit score high.

5. Affordability

Even though many different home loan alternatives are available to you, you must first assess your affordability before applying. In addition to paying the fixed monthly EMIs, you should be able to change them to fit your living standard comfortably.

Keep a consistent revenue stream to cover any unanticipated emergencies and consider administrative costs in addition to the EMI you choose to pay each month. So, while buying a home you like in a location you love is always an option, being able to afford the mortgage is also crucial.

6. Processing Fees

The borrower is responsible for paying processing costs to the lender once their home loan application is approved. Banks or other financial institutions charge up to 1% of the amount of the issued mortgage loan as loan processing costs. Find a bank with minimal or no processing costs. If you're ready to take the next big step, apply for an award winning home loan today!

7. Interest Negotiations

Whether you choose a fixed or flexible rate, the wisest course of action is to look around and attempt to get as many quotations as possible. Remember that lenders cannot "price match" one another's rates because doing so would be unfair to other buyers in comparable situations. That doesn't mean there isn't room for discussion, though.

Under some circumstances, mortgage lenders may credit a borrower's closing fees. The most frequent situations are when lenders must maintain their level of competition in an environment of declining rates or when delays lead to credit locks. You might be able to negotiate a better deal in these scenarios.

8. Unexpected Fees

Other administrative, processing, or service fees that banks impose on borrowers at the time of loan application may exist in addition to the EMIs. Make sure you go over these with the lender before applying for a loan. Check to see if these are monthly fees or one-time payments; if they are the latter, your monthly budget needs to be adjusted to account for them alongside your EMIs.

Make Informed Decisions While Taking the Path to Your Dream Home

Purchasing a home is expensive, so having the right knowledge to make the right decision for your hard-earned money is important. It's also an emotional, financial choice, but with the factors you've read, you will have the confidence to buy a property.

 

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