So you have found a house that you and your family like very much and you are now shopping around for a Home Loan, looking at offers from various banks and other financial institutions.
However, before you commit to the house or the loan, here are a few points you should think over to avoid problems in the future.
Don’t Take on More than You can Afford
Your financial position and your income might get you higher loan offers than you expected. Still, think before you sign the papers. The larger loan might buy you a bigger and better house, but does your budget allow for the larger repayments? After all, you have plenty of other commitments besides the Home Loan. To be on the safe side, use the tools available on financial portals to calculate Home Loan eligibility.
Factor in the Additional Costs of being a Homeowner
Often people just focus on the loan amount and EMI. They forget to consider the additional expenses that will come with homeownership, like the furnishing of a new home, utilities, Home Loan insurance payments and so on. These additional costs might add up to a point where you face a severe strain on your monthly income, affecting other essential expenses.
Stop and consider some negative possibilities even if the idea is distasteful. What happens if you have an accident, lose your job, or in other ways your income is reduced. What happens if you have to meet another big commitment like hospitalization of some family member, or college fees for your child who wants to pursue professional studies at a reputed university?
Make sure you have contingency plans in place, before you even consider taking up the loan.
Check your Credit Rating
Your CIBIL score tells the lender how creditworthy you are. If you do not check your score before you apply, your loan might be rejected for no fault of your own. In fact, sometimes you’ll face rejection because there might be a mistake in the CIBIL records. If you identify and rectify the mistake before applying for the loan, you can avoid a lot of hassle.
Also, keep up with your loan and credit card payments before applying for a Home Loan. This will ensure that you have a higher CIBIL score.
Avoid Taking on Additional Debts
Lenders keep checking your credit records. If you take on additional loans during or shortly before your Home Loan application, these will reflect negatively in your credit report. As a result, the bank might reduce the sanctioned amount or reject your loan altogether.
Shop Around and Negotiate
Don’t just pick up a loan from the bank where you have your savings account, simply because it’s convenient. There might be a lot of other lenders who offer Home Loans at better interest rates and terms. Use online financial marketplaces to find the best Home Loan interest rates out there.
Once you choose a bank, don’t accept the first set of terms they offer. Sit down and negotiate patiently for lowered interest rates, or for reductions in hidden costs like prepayment charges, late payment penalties and so on.
And always read the fine print to find if the bank imposes any additional conditions or charges on the loan.
A Home Loan is a huge commitment, but buying a home should be a happy occasion. You shouldn’t begin regretting your decision soon after you move into your new house. So, it is better to do your homework thoroughly before you begin the loan application process.