Here are some tips for home buyers looking for home loans.
Por V Swaminathan
A home loan is a crucial item for a home buyer. A home loan helps the buyer take advantage of future finances or income and buy the home of their dreams. In addition to improving the purchase budget, a home loan also provides tax-deductible benefits to borrowers. However, before you jump in, it’s very important to understand the important factors that can help you get a better home loan deal. Here are some tips for home buyers looking for home loans:
1. Check the credit score
When you apply for a loan, the first thing all lenders check is your credit score. Whether it is your eligibility for a loan, the amount of the loan that can be sanctioned or the interest rate, it all depends on your credit score. With an excellent credit rating, you can benefit from larger home loans at better interest rates. A credit score greater than 800 basis points is considered excellent. Lending institutions, like banks, prefer loan applicants with good credit scores because such borrowers consider themselves honest and worthy customers who will pay off their credit on time. You can build and improve your credit score by paying existing EMIs and credit card bills on time.
Once you have an idea of your credit score, make sure that all documents like proof of identity, proof of address, income tax returns, pay stubs, bank statements, proof of employer, etc., are in its place. If you have already finalized the property you wish to purchase, please keep documents related to the property ready, such as the identity of the seller and proof of address, title deed, map, certificate of completion, etc.
2. Get a joint mortgage loan
There are several advantages and benefits to taking out a joint home loan. When you add a co-applicant, your home loan eligibility increases, as the lender will consider the income of all applicants when deciding the loan amount. A joint home loan also makes all applicants eligible to claim the benefits of the tax deduction against the repayment of the home loan. Some banks even offer interest rates that are as low as 50 basis points if one of the applicants is a woman. In addition to these benefits, the responsibility to repay the mortgage loan can be shared by both people if the loans have been taken together.
3. Look for low interest rates
Different banks offer different interest rates and are also willing to negotiate on them. Even a small reduction of 10 to 20 basis points can help you save a significant amount per month, especially in the long run. As a borrower, identify the best loan companies that charge the lowest interest rates. If the applicant is buying a property that is newly built and has pre-approved bankers to make loans, then the buyer can make use of the loan, as the lenders can process it quickly; they would already have many details of the property. Also, the lender may be offering lower interest rates than others may offer.
4. Review the documents and read all the details.
Lenders will ask you to sign a large number of documents before disbursing your loan. While it is a difficult task to read all those documents carefully, try to review as many as possible carefully. Clauses written in small print should be read carefully, as they usually contain terms and conditions that may be against the interests of the borrower.
5. Maximize the down payment and minimize the permanence
Typically, the borrower is expected or required to pay a minimum down payment of 20%. However, financial prudence dictates that the borrower should try to pay 50-60% of the property’s value as a down payment and the remaining amount can be financed through a mortgage loan. The higher the down payment, the lower the interest charge. In terms of tenure, while many lenders offer long-term loans of up to 30 years for repayment; try to choose a tenure of no more than 20 years. The reason is that over longer periods of time, a borrower ends up paying a lot in interest on the loan and also faces a higher risk of interest rate volatility.
(El autor es CEO, Andromeda & Apnapaisa)
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