Planning to buy your dream home? It is not always possible to have so much savings or ready cash for purchasing a home. Thanks to the facility of home loans that give us the opportunity to own our dream home. Many banks and financial institutions give us tempting offers to avail loans in the real estate market. However, one must be careful to collect all the related information before opting for any offer for loans. It is crucial to understand all the factors, terms and conditions of repayment. Once you make up your mind, the next step is getting the money. Getting a home loan may appear a challenging task, but it can be made simple by keeping a few points clear in our mind.
Affordability
People usually get emotional when it comes to their homes. However, the decision of buying one should be out and out practical. The purchase of your dream home should not make a hole in your wallet. Thus, you must check beforehand whether the down payment and the EMIs are within your range or not. The down payment you decide to shell out should be planned in a way that you still have the money to meet any emergency, while the EMIs should be planned as per the basic rule of not exceeding 45% of your total income.
Deciding on the Lender
Since the loan taker is the customer, the option of choosing from the lenders is in his court. So, one should do enough research to decide on the bank or the financial institution. Keep in mind that don’t go by the offers of just one, but consider at least 5-6 companies before making your decision. Do check the terms and conditions they are offering and what exactly suits your requirements. While evaluating the lenders, consider both quantitative and qualitative aspects of the loan. For instance, the interest rate is important and may not vary much between the banks but the customer service, internet banking facilities and other such features may differ extensively. You must consider these things as you have to manage with them for the rest of the loan tenure.
Interest Rates
First of all, people obviously look for loans that come with lower interest rates. During festival season, many banks and institutions offer home loans at discounted interest rates. Before making any decision, you must cautiously check as well as have the clear understanding on the calculation of interest rates. Now the question is whether you’ll go for fixed or variable interest rates. As we know fixed rate of interest is generally higher, the monthly EMIs would obviously be higher. So, it is always better to go for variable or floating rate of interest on your loan. Keep a check of the interest rate trend. If the interest rates have drastically increased in a short span of time, you need to reconsider your decision as it may increase your future EMIs considerably. For this, it would be better to have a timely follow up with the bank so that you can save on interest, when the rate changes in your favour.
Loan Tenure
Usually people tend to go for the longer tenure seeing that the EMIs are more affordable. However, it also means that you finish off paying more interest. Consequently, your dream home becomes more expensive. For people who have started working, it is apt to choose long tenure as affordability would be a major concern. There are chances that you pay EMIs before the time. In later years of working life, it gets difficult to manage long tenure loans.
Credit Score
Before approving the loan, every bank or financial institution checks for your credit score. Credit score is the score card of your financial life until now. With this, the bank reviews your financial credibility and the risk associated with their loan payment. A bad credit score will get you nothing, thus letting your dreams crashed. That's why it is important to know your credit score from the CIBIL website. It will help you to fix any mistakes in the score.
Though home loans offer a nice opportunity to buy homes without ready cash, it is up to you to understand the terms and conditions associated with it to enjoy the advantage and save money. As you take a home loan, you are entering in a long term relationship with your lender.
Taking a home loan entails a long term relationship with your lender. Hence, keep these pointers in mind while you hunt for the right home loan for your dream home.