Best things that you need to look when applying for home loan in India?
In the second most populated country of the world, the definition of basic needs of life still exist i.e. shelter, cloth and food. Now with the fast pace of development of the country, the income of people is also increasing and so is the desire to own a home of their own. People are willing to take loans not only from friends and family but also secured loans from banks and even financial institutions. Hence home loan has become a very famous category of loan in India in such a short time span.4
Owning an asset like home provides an individual with stability as well as some sense of security. But not everyone can get it built on their home and hence the role of loans comes into picture. With the ever increasing demand for home loans market is flooded with multitude of offers.
What to do before applying for a home loan?
Taking a home loan is a very crucial financial decision because repayment of a loan can be a meticulous task and can take many years. Which involves an individual committing a large chunk of his/her income for the repayment of loan which involves both principal and interest amount. Here are some useful tips to follow when seriously considering to apply for a home loan:
Down Payment: in most of the home loan cases, applicants need to deposit 20% of price of their home purchased as down payment. Anything less than 20% is considered risky and also results in a higher rate of interest.
Credit score: credit score is the most essential factor which would help you to qualify for a home loan and would also determine what interest rate you pay for such loan. Higher the credit score more are chances of loan approval and vice-versa also high credit score enables an individual to bargain for a low interest rate.
Source of Income: Banks generally prefer candidates who have a consistent source of income and a stable employment history. Because a candidate with consistent income is a less risky venture for the banks in terms of repayment of interest and principal amount. Also banks devise the interest rate based on the employment stability of the applicants.
Debt to income ratio: it refers to the ratio of debt an individual has compared to his/her overall income. To avail loans at a cheaper interest rate, candidate should focus on maintaining a lower debt-to-income ratio. Try and make larger payments towards credit card bills, pay off existing loans EMIs and then apply for a home loan.
Negotiate: don’t settle for what is offered to you. Always negotiate and look around for better options. There is always a better deal hiding in one nook and corner. All you got to do is search for it. You will be in for a pleasant surprise to find how much your EMIs reduce with just some haggling and also if interest rate doesn’t change you can negotiate for other terms such as no penalty on closure, etc.
Here is a quick fix: if you are an existing customer of bank and already have taken a loan from them, then make them your 1st option. As banks tend to give better interest rate to their existing customers and prefer them above others.