Home is a temple in itself and everyone worships it with ease, joy and decorates it to make it more attractive and appealing to the eyes in their own way. It is a dream which everyone sees in his/her life once in a lifetime and hence, save each hard earned penny to invest in Home to call of his own. But due to rise in land prices and vast Urbanisation property prices are reaching roof top that is why it is too difficult to make a dream of a home come true of only savings. That is why the provision of home loan is being offered by various banks so that everyone that dreamt of his own home realise it any possible way. Many real estate developers these days get their residential projects approved of various well-known banks so that it is easy for the borrowers to apply for the Home Loan on government approved land. Applying for the home loan is an easy process but to repay it back takes long-time hence, relationship between bank and borrower needs to be smooth. That is why it is essential that borrower should consider the following factors while applying for a home loan in order to have a good track record of repayment.
The main factors which will be considered while applying for Home loan is as mentioned below:-
- DON’T FALL PREY TO LENDERS IN A HURRY: In order to increase the economy of the country many well known private and government banks have been growing in the country and loans are a big business for a bank. The majority of banks keep big targets for their employees and in order to meet their targets the bank agents are always in a hurry to provide limited details to borrowers so that they easily takes Loan in very less time as it will add to their monthly targets and is a source of income for them. Hence, borrowers should always do survey and read all the details of information available on home loan lenders carefully and do not yields to pressure of builders and loan agents to hurry up things to apply for home loan. The borrower should go shopping for a loan that provides favourable terms and conditions otherwise he has to bear a brunt of whole host of hidden charges like foreclosure charges and higher interest rate while being granted for a home loan.
- DO READ THE TERMS AND CONDITIONS CAREFULLY: The borrower first needs to make budget that suits him and do vast survey in order to look for that locations that are suitable for him for selection of his residential property according to his convenience and proximity to various places of convenience like hospital, school, college, bus stand and airport, shopping complex to ease life and family. The lenders and loan agents are always in a hurry to explain all the hidden charges to be levied from customers hence, Borrower should read every bit of information available on home loan lenders carefully and keenly.
- KNOW YOUR LOAN AND LENDER WELL: Before making mind to apply for Loan from a particular lender customer should know which type of loan is best suited to them and how down payment affects your monthly mortgage payment. Borrower should know to follow key factors according to which loan is approved:-
- Credit Scores: Bank first of all checks the details of the Borrower on CIBIL with credit score. The credit score is very important in order to get the loan approved. Credit score of 660 or higher is considered as prime and below 620 is subprime. If borrower’s credit score is subprime the borrower have higher rate and chances are less to get his loan approved.
- Your Earnings: Loans to be approved also depends upon borrower’s earning from steady source of income or may sometimes from other sources like wife’s tuitions Income, child support, alimony payments, and stock dividends. Normally self-employed borrower of prime credit score and irregular income is at higher risk of not getting the loan.
- Debt and Income: The lenders like banks and home finance companies consider debt-to-income ratio when determining the risk. Usually, 26/36 is the qualifying ratio.
- Money Down: Generally after applying for Loan, the Borrower has to pay a down payment. The more, the customer pays the more he has equity in the share of Home. The down payment depends on the cost of the home. Borrower may need’s to pay 5 to 20% of the total cost of Home.
- Cash Leftover: The cash which is left after down payment and closing cost like bank account, bonds, and stocks. Bank usually takes an account of your cash leftover details into your loan to be approved and considered the borrower for more liquid income at lower risk.
- Loan Types and Rates: The borrower should be aware of the three main types of Loans. The three types are Conventional loans, loans backed by Veteran Administration, First time home buyers. Regardless of the type of home loan interest rate depend on factors like current market conditions, state of the economy and credit profile of the borrower. The interest rate stay the same if the borrower has chosen the fixed rate mortgage and varies if borrower chooses the adjustable-rate mortgage. Lenders charge points in addition to interest to cover costs. Points may be varied and it will affect the mortgage and can be negotiated.
- Pre-approval: The lender gives approval of Loan to borrower if the borrower ‘s KYC documents and his application for loan has been reviewed and no changes are required to be done within 60 to 90 days once the borrower put a contract on a house with specified price range.
- Sale Price: Usually borrower has to pay more down payment if the price of his house is more than his preapproved limit and higher your monthly housing payments.
- Closing Costs: It includes those charges which are levied one time including the administration charges such as loan application fees, fees to obtain your credit report, appraisal fees for your home and title insurance. It is 3 to 4 % of the total price of the property’s sale price. The lender should reveal all the Closing Costs in writing to have good faith.
- CHOOSE A WELL-KNOWN LENDER:- Each and every bank has its own method of screening process before sanctioning a loan. Some do it quickly whereas other takes long time for the same process as they provide some exceptional services to the customers hence, it is essential to always look for a reliable lender.
- LOAN APPROVAL PROCESS:-Always chose a bank according to your own convenience and requirements as these days private sector banks and home finance companies like Axis Bank, ICICI Bank, ADITYA Birla Housing Finance, India bulls Home Finance ltd. takes very less time may be few week to get the loan approved as compared to their counterpart of Government sector bank. The government sector banks charge less processing fees for disbursal of loans as compared to private banks but some people prefer private sector banks as they have good internet banking facilities. Hence, borrower can decide accordingly as each bank has its own pros and cons.
- ELIGIBILITY: In order to apply for a loan a customer has to fill an application form with KYC documents attached like Pan card , bank statement for the last 6 months ,income proof like salary slips and form 16 for the last 3 years, age proof and address proof. The bank takes all these documents and starts with the process by pulling your CIBIL score to check credit history.
- LOAN REPAYMENT: The borrower should be clear regarding the foreclosure clauses and settlement charges clearly so that borrower does not get overcharged in the end and bear the brunt of it. There should not any hidden charges, with whom customers are not aware of. Borrower should be strongly advice that he should read the terms and conditions keenly and carefully before taking up the loan.
- BORROWING COSTS: The bank is charging certain charges for lending the money to the borrower which includes processing fees, Service Tax, Franking charges that are applicable for registering the loan document, Interest which could be fixed or floating. Borrower’s should not calculate or go by percentage but calculate costs in actual terms and also should check that whether the bank is not charges certain charges which Reserve Bank of India has banned like Prepayment and Foreclosure charges.
Hence, the aforesaid factors should be considered thoroughly in order to have long-term peaceful relationship of Borrower with Lender.