5 Steps to Getting a Home Loan in India
Buying a home that meets all your needs and preferences, is one of life’s most-awaited bliss. That being said, it isn’t always feasible to have savings as high as the cost of a home, which often goes up to more than just a few lakh rupees. So, what is the way out? Simple. Home loans. Pertaining to the constant need for excess funds that a vast majority of home buyers face, banks and financial institutions offer convenient Home Loans with attractive interest rates and flexible repayment terms.
So, if you happen to be contemplating buying a house and applying for a Home Loan, read on to know the steps you need to take to get your Home Loan application approved at the earliest possible.
1. Understand Your Financing Needs
When looking for that dream home, quite often you can go overboard without even realizing it. Hence, an ideal way to go about this exercise is by drawing a budget giving due diligence to your savings and income. When it comes to savings, you must only shell out so much, that you still have some money to meet any unforeseen emergencies. Moreover, as a rule of thumb, your Home Loan EMI (Equated Monthly Instalment) must not exceed 45% of your household income. Hence, if you have savings worth 5 Lakhs, and total revenue of 50,000 a month, we recommend that you only use 3 Lakh as your down payment, and ensure that your EMI doesn’t exceed 22,500 a month.
2. Look for Optimal Interest Rates
Given the significance of a Home Loan, it is more than important that you do not make a hasty decision. Hence, rather than simply opting for a lender with the most attractive offer, you can choose to wait for festive discounts. This will make it easier for you to go for a Home Loan offer at the lowest rate. Here, you must also consider yet another factor of extreme importance, and that is the type of interest rates, including- Floating Interest and Fixed Interest.
If you’re opting for a short duration loan for about 10-15 years, it is advisable to seek a fixed interest rate. On the other hand, for a longer tenure, you should look for floating interest rates to avail the benefit of decreased rate (when applicable).
3. Zero-In on an Ideal Loan Tenure
It should not come as a surprise that a longer tenure of the loan will significantly bring down the amount you need to pay per EMI. This is an aspect that attracts a large number of people towards long-term investments. However, you must understand the fact the longer the tenure, the more interest you end up paying. Moreover, you are under a financial commitment for a longer period, which may not be an ideal choice to make.
However, if your monthly income is on the lower end, and you are still committed to buying a house that costs higher than your budget, then, a longer tenure might prove to be a great option for you.
4. Analyse Your Credit Score
Before filing your application for a Home Loan, it is in your best interest to order a copy of your credit score and review it. The reason behind this is simple. Banks and online lenders are often more interested in giving out loans to the people who exhibit a good financial discipline as they can be relied upon for timely repayments. In fact, even when borrowers with low credit ratings get approvals on their loan, they may be asked to pay a higher rate of interest.
Hence, your score is equal to or higher than 650, then you are good to go. On the other hand, if you have a low credit score, then you should work on improving it, before applying.
5. Find a Suitable Lender
When you set out to find an ideal lender for your Home Loan, we strongly recommend you to get in touch with at least 4-5 of them, and carefully analyse the offers given by each one. While this may take some of your precious time, it is worth to go through the terms and conditions laid down by every lender. While you want to get the loan at the lowest interest rate, you should also look for other features such as:
- Low Processing Fee
- Home Loan Balance Transfer Facility
- Foreclosure and Prepayment Options
- Internet Banking Feature
- Good Customer Service
- Low Penalty
Since all of these factors will help determine a stress-free loan tenure for you, make sure you only consider the lender which offers them all. We hope that you now have a fair idea of How to Get a Home Loan in India. While the attractive loan offers and fast approval facilities have made it considerably convenient to get a loan, it is your onus first to understand the terms related to the same, and only then go ahead with the process.
Also Read: 3 Types of Lesser Known Home Loans
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