Owning a dream home is perhaps one of the most significant financial decisions one makes in his/her lifetime. In almost all instances, first-time buyers need to avail home loan to make the dream of owning a property bring to fruition. Resultantly, the ensuing financial liability is considerable and can sometimes stretch up to a tenure of 24 months.
Given that this loan commitment runs into years before it is fully repaid, there are a few things borrowers keep in mind before making the home loan application.
Few tips to keep in mind before initiating home loan application
- Credit score plays a vital role
Credit score is crucial in assessing an applicant’s home loan eligibility. The score considers an individual’s repayment record and consistency in the payment of credit card dues, EMIs etc. The score is indicated in the credit information report (CIR), which also includes the credit history from previous loans undertaken from other financial institutions.
If your credit score is higher, the chance of your home loan application being approved is also greater. Moreover, one may also enjoy the benefit of availing a lower interest rate on a home loan. It is recommended that you check your credit score 6 – 12 months before purchasing a house.
- EMI obligations must be evaluated in advance
You need to have a fair estimation of what your monthly instalment outgo would be. It can only be done if you have already ascertained your budget for the home. On that basis, it is determined how much loan amount will be required and the amount of down payment you will need to make to avail the advance.
Generally, 80% of a property’s valuation is sanctioned as home loan, provided that the income of an applicant is found to be sufficient.
You should identify the range of monthly installments that you can comfortably pay over the loan tenure. Online home loan EMI calculator can be used to determine the various options available before a borrower.
- Check all documentation requirements carefully
Before a home loan application, you must be familiar with the documents that need to be submitted with the lender. Those are something that you must know before taking a home loan to ensure a hassle-free application process. Unless those are readily available before you approach a lending financial institution, the application process may unnecessarily prolong. Some of the required documents are –
- Identity proof – PAN card, driving licence, Voter ID, passport.
- Address proof – Telephone bill, electricity bill, water bill, passport, driving license, Aadhaar card, voter ID.
- Income proof – Form 16 or latest salary slips (for salaried personnel), bank account statements for the last six months (for self-employed).
Apart from these, other documents have to be submitted, such as passport-size photographs and documents proving five years’ business vintage, which make for essential home loan documents for self-employed individuals.
- Choosing a suitable lender is imperative
Prospective home buyers are cautioned against applying for multiple credits from different financial institutions at the same time. Multiple inquiries by lenders would end up lowering your credit score. You are, however, free to make comparisons among different options.
Further, if you identify lenders who extend pre-approved offers, the loan approval time reduces considerably. Such an offer is offered on other financial products such as loan against property as well. You can check your pre-approved offer by submitting a few essential details like name and contact number.
Furthermore, take note of the eligibility criteria as laid down by different financial institutions in terms of home loan interest rate, processing fee, credit score etc. Identify one or two lenders who would match your requirements.
Once individuals take into consideration the above-mentioned aspects before initiating a home loan application, it will render them well prepared and at the same time, increase the chances of approval. Moreover, in the case of joint home loan documents of co-borrower should also be kept handy.