The decision to take a home loan for buying a house is very important. Since home loan EMIs have to be repaid over a long period of time, one has to make a very careful decision in choosing it. Let us see what are the things that first-time home loan borrowers should keep in mind so that they can feel comfortable while paying EMI for a long time.
1.Good Credit Score, Cheap Loan
The credit score of the customer is of utmost importance for the financial institutions offering home loans including banks. A good credit score gives you higher and cheaper loans. A credit score above 800 basis points is considered excellent. Credit score can be improved by paying your current EMI and credit card bills on time. Once you know your credit score, keep other documents ready including identity proof, address proof, documents related to income tax return, bank statement, employer proof. If you have decided to buy a house, then also collect seller identity and address proof, title of the property, map, completion certificate so that it is easy to take a loan.
2. Benefits of taking a Joint Home Loan
If you are taking a home loan jointly with someone, then it is your advantage. In such a situation, the bank considers the loan by adding the income of the co-applicants. The common application also increases the eligibility to avail the loan. Joint home loan offers the benefit of tax deduction to the co-applicants. Some banks reduce the home loan interest rate by up to half a percent if there are women applicants together. By taking a joint home, the burden of paying EMI is also divided.
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3. Look for Low Interest Rates
Before taking a home loan, find out which bank is giving the loan at what rate. The rates of different banks are different and there is a difference of 10 to 20 basis points. Even such a difference in long term loans can save you a lot of money. If an applicant is buying a newly constructed house and takes a loan from a pre-approved bank, then it is a quick process. Because banks already have a lot of information about this property. In this type of property, your bank can give loan at less interest than other banks.
4. Read all the documents carefully
However, reading the bank documents related to home loan is a cumbersome task as it is very bulky and full of technical terms. Still, one should try to understand it by reading it as far as possible. For this, you can take help of sites giving financial content or loan related information. Try to read carefully the things written in small letters in the documents. It is important to read and understand the terms and conditions related to EMI payment properly.
5. Maximum down payment, minimum loan tenure
Usually, banks keep a demand of 20 percent down payment while giving the loan. This is also necessary in many banks. However, the ideal situation is that if the home loan customer makes a downpayment of 50 to 60 per cent of the cost of the house, the EMI burden is significantly reduced. The higher the down payment you make, the less will be the interest burden on you. Many banks keep the loan repayment period up to 30 years. But the customer should not take a loan of more than 20 years. The longer the loan repayment tenure, the greater will be your financial burden. Also, there is a risk of volatility in interest rates.