Friday, August 7, 2020
Home Finance Buying Your Dream Home Can Be Easy If You Read This

Buying Your Dream Home Can Be Easy If You Read This

Introduction

India is moving forward at a faster pace than ever before. The real estate industry has been the driving force behind India’s spectacular growth story. With interest rates stooping to levels never seen in the recent past, it is the best time to invest in a property and reap rich dividends in the years to come.

Read this article if you want to know how a home loan can fulfill your dream of owning a house and claim a stake in India’s growth in the long run.

Factors You Should Keep in Mind Before Applying for a Home Loan

  1. Credit Score

The credit score is one of the most important factors that determine your home loan eligibility. Generally, lenders expect a borrower to have a credit score of 650 and above. The higher your score, the better are your chances of getting a loan. While a home loan calculator can show you the EMI, by taking steps to increase your credit score, you may avail of a discount in the interest rate in comparison to what the home loan calculator shows you.

  1. Loan to Value Ratio

The loan to value ratio determines the quantum of the property value that you are eligible to get as a home loan. Generally, lenders allow you to get funds up to 90% of the property’s market value if your home loan amount is below INR 30 lacs. You can get up to 80% of your loan amount is between 30 and 75 lacs, and 75% for loan amount above 75 lacs.

While the lender may encourage you to apply for the maximum home loan amount as per your eligibility, as a prudent borrower, you must use a home loan calculator to figure out the optimum loan amount, even if that entails a reduction in the actual amount.

  1. Interest Rate

Home loan interest rates can be fixed or floating. 

If you opt for a fixed rate of interest, your monthly outgo will remain the same irrespective of home loan interest rate fluctuations in the broader market. During the first few years, you have to pay only the interest; while in the latter half, you have to pay the principal, along with the residual interest. 

A fixed-rate of interest will suit you more if you want clarity on the amount you have to pay every month.

If, however, you wish to take a little risk and go along with the market, a floating rate of interest would suit you more. Generally, a home loan calculator uses the floating rate of interest to calculate your EMI. At present, the floating rate is hovering between 8.60 and 9.95%.

  1. Documentation

Before applying for a home loan, you should keep a few documents ready. This would save you precious time once the other processes are over. The documents you need to apply for a home loan include- age, identity, and address proof, along with bank statements, income proof, and property documents.

  1. Loan Repayment

Depending on your credit history and income profile, the lender may allow you a tenure of up to 30 years. However, if you can spare some extra cash through the loan term, try to choose a shorter tenure. A shorter duration would not only help you to clear off your debt but also make you eligible to apply for other loans.

Conclusion

Here in this article, we have mentioned the complete information about a home loan that sort out all your queries. A home loan calculator is the best way to calculate your home loan eligibility and EMI. You may also change the interest rate, calculate the EMI, and find out which lender is giving you the best rates.


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