Purchasing a residential property is among the most significant financial decisions you and your family will ever make. The only way for most first-time homebuyers to fulfil their dream is to apply for a housing loan.
Besides providing a roof over your head, buying a home adds value to your social status and offers a sense of security. You can create a secure haven for your family by designing your home to meet their needs and preferences.
Home loans allow buyers to make an immediate down payment and stretch out the cost of the purchase over the years without feeling the financial burden. A home loan is a long-term financial commitment and involves a substantial repayment over a longer tenure. It's advisable to evaluate your financial plan before availing a home loan.
Here's a checklist before finalising a property purchase or taking out a housing loan:
Down Payment
The home buyer must pay for a portion of the expenses. This contribution differs from bank to bank and also depends on the kind of property, such as a new home or an old one, being resold.
Credit Score
This is one of the primary factors of the eligibility and loan amount that a bank can approve. Aim to raise your credit score before applying for a home loan. This can be achieved by building a consistent history of on-time credit card payments as well as loan repayments.
Check LTV Ratio
Home loans do not offer 100% financing, even though they provide you with money for your house. Based on the cost of the property, the LTV (Loan to Value) ratio establishes the maximum loan amount. The bank would lend 70% of the property's cost if the ratio was 70%, and you would be responsible for the remaining 30%.
Pre-Approved Housing Loan
Banks offer pre-approved house loan approval based on the applicant's income prior to the property being found and confirmed. Based on your affordability, a pre-approved credit can assist you in deciding on a property by giving you an idea of the loan amount you are eligible for.
Home loan documents
The home loan application must be submitted along with several supporting documents, including proof of income, proof of residency, proof of financial status and property document verification. These records are used by the lender to confirm your identification, income and eligibility.
Check Interest Rate
Interest rates on home loans can be either fixed or variable (floating rate). If the bank modifies home loan rates, it will affect the payback period. Choose floating-rate loans if you expect future drops in home loan interest rates. Alternatively, you might opt for a fixed-rate loan to lock in low interest rates if you think that interest rates may increase.
Be Aware Of Loan Charges
The processing fee is one of the various charges that come with home loans. Verify the loan's processing fee and additional charges. For cost-effectiveness, evaluate multiple offers and opt for a loan with the lowest interest rate.
Finally, always compare the available possibilities before choosing a loan. Gather information about the bank's or financial institution's processing fees and loan foreclosure fees so that you are financially ready for them in advance. Look around and select a lender that provides the best home loan at the lowest possible interest rate.
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