With the Reserve Bank of India injecting more liquidity into the market, it is an ideal time for homebuyers to invest in houses. Moreover, easy credit availability makes it easier for individuals to realise the dream of owning their own house. However, buyers planning to apply for a home loan must consider certain factors to leverage the fund.
Besides fulfilling the credit requirements, it will also streamline the home loan process. Thus, intending homeowners should consider the points below before opting for a housing loan:
1. Property Value and Repayment Capacity
As a general rule, one should settle for a house that costs less than 5 times their annual income. Upon doing so, one can effortlessly pay the EMIs without curtailing other expenses. It mandates borrowers to consider their repayment capacity before applying for a home loan.
Lenders check their income before sanctioning a higher loan amount. A borrower’s current income estimates his repayment capacity. Therefore, financial institutions offer an appreciable loan amount to ones with strong repayment capacity.
2. Existing Liabilities
Borrowers with multiple liabilities often find it difficult to repay their housing loans. This, in turn, lowers their home loan eligibility and causes inconvenience during loan applications.
Ideally, one should secure a loan where the EMI must not exceed 35% of their monthly income, wherein their total EMI burden should not be more than 50%. In case there are no additional EMI burdens, one can spend up to 50% of their income towards repaying their home loans.
However, before doing so, one should be aware of some other factors that can affect home loan eligibility. Factoring in these pointers will increase their chances of getting a high-value loan amount.
3. Credit Score
Borrowers with a good credit score and history are eligible for a higher loan amount and lower home loan interest rate. Therefore, it is necessary to keep a clean credit profile to secure the best deals from lenders. Typically, a credit score above 750 is considered a good score.
Further, reputed financial lenders offer a high loan corpus and flexible tenor on a home loan.
In addition, borrowers can also obtain pre-approved offers for a hassle-free loan application process. Such offers are available on a host of financial products like LAP, home loans, etc. They can check their pre-approved offer by entering basic details like name and phone number.
4. Loan Tenor
Generally, individuals often opt for a longer home loan tenor to pay less EMI. However, by doing so, they increase their interest outgo and eventually the borrowing cost.
Therefore, to be on the safe side, individuals should use a home loan emi calculator before taking a home loan.
5. Home Loan Interest Rates
Calculating EMIs and the down payment is not enough for a smooth borrowing experience. Before settling for a loan, borrowers must check interest rates on a housing loan. To do so, they should compare interest rates and other associated fees offered by financial lenders.
In case a lender offers a loan at a higher interest rate, existing borrowers can opt for a home loan balance transfer after a certain time after availing a loan. They can shift the outstanding loan balance to another lender offering low-interest rates and better deals.
Apart from the above factors, borrowers must also arrange a few documents prior to a loan application.
List of Documents for a Home Loan
Individuals must consider presenting the following list of documents for a seamless home loan application:
- Identity proof like PAN card, driving license, Voter ID, valid passport, etc.
- Address proof such as latest electricity, water, telephone bill, Aadhaar card, driving license, valid passport, voter ID.
- Passport-size photograph.
- 5 years business continuity proof for self-employed individuals.
- Latest salary slips or Form 16 for salaried applicants.
- Past 6 months bank account statements for both salaried and self-employed borrowers.
Therefore, potential buyers must keep these documents mentioned above for a smooth housing loan process. As RBI’s repo rates remain unchanged at 4%, financial institutions are offering housing loans at lower rates of interest, making it an ideal time to purchase them. However, homebuyers must not forget to skim through the factors mentioned above before they make a home loan application for additional benefits.
