What factors decide the best company for home loans in India?

Owning a house is the biggest dream a person can have, and buying one is probably the biggest financial decision you can make. It brings with it a sense of achievement, peace, comfort, and identity. However, with the financial instability induced by the COVID-19, not everyone can afford to buy a house from their savings or investment. 

In such cases, you can still own your dream house by applying for a home loan in India. It is a secured loan that allows you to buy your dream house without putting any burden on your finances. Most lenders offer up to 70% to 80% of the property’s market value as a loan. With affordable interest rates and flexible loan tenure, making timely repayments is easy and convenient. The best part is that you can use a home loan EMI calculator to determine your affordably and manage your finances well. 

Things to consider before applying for home loans in India

  • Interest rate 

It is worth noting that the home loan interest rates vary across different lenders in the market and the types of interest rates. Before applying for a home loan, it would be wise to compare different interest rates. Make sure to choose a loan that offers the lowest interest rate based on your eligibility. Your interest rate also depends on the type of rates available, such as floating and fixed interest rates.  

Under a fixed rate of interest, the EMI remains constants throughout the repayment tenure. As with a floating rate of interest, the interest rate keeps changing over time, based on the RBI’s instructions. It may prove to be beneficial as interest rates usually fall in the future. 

  • Credit score 

Your credit score plays a crucial role in your home loan application. It indicates your creditworthiness. If you wish to apply for a home loan to finance your dream house, it is imperative to maintain a minimum CIBIL score of 700. Keep in mind that the higher your credit score, the better are your chances of securing higher loan amounts and lower interest rates.

  • Loan tenure

Home loans in India have longer loan tenures. It can range between 12 months and can go up to even 15 years, depending only on your lender. However, you must choose a loan tenure based on your repayment capacity. Lenders generally offer a lower interest rate on shorter loan tenure. So, if you wish to secure better rates, and if you have the budget, make sure to choose a shorter loan tenure. 

  • Equated monthly instalments 

Your EMIs are your monthly payments towards your home loan. Your EMI amount depends on the loan amount, interest rate, and loan tenure you get. The higher the said values, the higher would be your EMI. While applying for a home loan, make sure to keep your EMI amount within or below 45% of your total income. 

  • Documentation requirements

Before applying for a home loan, you will need to check your lender’s requirements. You will have to submit the following documents along with your application: 

  • Identification proof, address proof, and age proof: Aadhaar Card, Passport, Ration Card, PAN Card, Utility Bill, etc. 
  • Income proof: Salary slips, bank statements, ITR, or form 16. 
  • Property documents: Title deeds and home insurance documents. 
  • Processing fees

Another factor you will need to be mindful of is the processing fees. Your lender may charge up to 1% of the total loan amount as processing fees to issue a loan. Before submitting your loan application, make sure to negotiate the processing fees to reduce the total cost of borrowing. 

  • Terms and conditions 

After your loan application, your lender will require you to sign a document containing the terms and conditions of the loan. It includes processing fees, loan tenure, additional fees, penalties, etc. You will need to carefully read the terms and conditions of your loan before signing the document. 

  • Prepayment penalty

As per the Reserve Bank of India (RBI), lenders are not allowed to charge a prepayment penalty for paying the loan amount with the due date.  It means that you can prepay your loan when you get a surplus amount in your account without incurring a prepayment penalty. 

  • Foreclosure norms

It refers to the repayment of the outstanding loan amount before the end of the loan tenure. The best part about a home loan is that you do not have to pay any penalty for repaying your loan if you have chosen a floating rate of interest. As with a fixed rate of interest rate, you will have to pay a nominal rate or amount as a penalty.

With all this information, applying for a home loan becomes much easier. Speak to a trusted lender and found out about their policies to apply for a home loan at attractive interest rates.

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