Factors to Consider Before Taking a Home Loan
The factors given here are designed specifically so that you don’t miss the chance to achieve your dream before paying all the money beforehand. Taking a home loan may seem like a complicated process. You need to know some elements of a home loan before applying to get one. You will not qualify for a loan if your credit score is poor and your earnings not stable however if you have a strong loan repayment capability, a stable income and a good credit score you can qualify for a home loan.
One main factor in the home loan eligibility criteria is to calculate the home loan eligibility through EMI calculation. The limits that banks have set is 40% to 50% of the borrower’s income like the allowance dearness and basic salary. Banks also consider the credit history of the borrower. You will be required to pay a high-interest rate, and your amount will have to be reduced in case you have a poor credit score and if you have an existing loan. Individuals who have a good credit score, strong capability of repayment and stable income find it easy to acquire a loan, unlike people whose credit score is not good and whose earnings are erratic. Having a co-applicant in your loan makes it easier for you to get a loan.
You need to understand your loan type out of the kinds of loans offered by banks. Floating interest loan and fixed interest loans are the two common types of loans offered by most banks. The floating interest loan is where the interest varies going by the market condition which often leads to EMI fluctuation. The fixed interest loan is where the interest is constant and the EMI to be paid is constant throughout the loan repayment period. Floating interest loans do not have a high-interest rate while in fixed interest home loans have a 2.5% higher interest rate.
No matter the type of home loan you select always remember to negotiate the interest rate. Although banks have an edge, you must negotiate, and more so if you are their customer with savings account with them. If your credit score is good, you can easily bargain. If you apply for your home loan at the end of the month, you can greatly benefit especially since banks work on targets meaning they can be versatile during the end of the month for business.
The home loan agreement is a fine print containing all details of the loan. Pay the EMI on time. Ensure you carefully read the loan agreement before you sign. Be careful about the penalty, hidden charges as well as loan processing fees. You will fall into bigger problems in future if you are not careful of the context of the agreement.