Have you forethought to permute your desire of living in a swanky bungalow to become reality? That’s an audacious move!! A house ranks on the top as a crucial asset in the catalog of financial security. Other pillars depicting financial prosperity include emergency funds and on-track retirement plans. With all of these essentials in place, you don’t have to worry about the financial security of your future. A housing loan is a foremost borrowing tool and a vital enabler for innumerable homebuyers. If you are wondering how to apply for home loan, then it is quite obvious that the linchpin will be the best rates for home loan, processing fee, home loan EMI together with other critical eligibility requirements. However, there is more to add to this list that is equally important. This must-read guide encapsulates every minute thing as per the prospective borrower’s perspective.
As a home loan applicant, you should be well-versed with crucial aspects of availing a Home Loan. Here is a rundown of such necessities:
Explore to the Fullest
If you have done your groundwork to apply for home loan by counting on someone’s research and advice, you are highly mistaken. Dip your fingers and look forward to countless available home loan products, best rates for home loans as per your financial preferences. You must explore to the fullest to get extensive knowledge about home loans and to grab the pick of the bunch offers.
Think About the Funds
There are strong possibilities that you got a promotion or a salary hike which further resulted in access to huge funds. Whatever the reason behind, all you need to do is, think conservatively. Before you plan to invest this amount, have a rough estimate of crucial monthly expenses along with your financial commitments. Furthermore, after deducting the expenses, catch sight of the down payment you can bear to pay. In addition, plan what amount of home loan EMI will be affordable for you. The key point is you can’t risk other things to avail of a Home Loan.
Interest Rates – Fixed Rate vs Floating Rate
When you apply for home loan, one particular factor you need to look into is types of interest rates and the difference between a fixed rate and a floating rate. When you have reliable information about these two you can get the best rates for home loans with utmost ease. When an applicant counts on a fixed rate, the interest rates remain static throughout the loan tenure, whereas in floating rates, the applicant has to pay dynamic interest rates based upon the market trends. Fixed rates can be a good choice, but at the same time, you might have to pay a higher amount in the long run even if the market plunges down. On the other side, floating rates of interest offer flexible home loan EMIs and best rates for home loan. You might have to pay increased EMIs for a certain time when interest rates show a rise but otherwise you can enjoy the benefits of reduced EMIs.
Following up, the type of rate of interest depicts your monthly loan payments, be cautious while you plump for any from them.
The Wizardry of Credit Score
Are you cognizant of the critical role of Credit Score in the home loan? Well, note it down in bold letters that credit score helps to avail foremost housing finance and best rates for home loan. A count of 750 or above markedly elevates the chances to come by a Home Loan approval effortlessly. In the bargain, if the lender approves your home loan application, regardless of the bad CIBIL Score, there will be a drawback of high-interest rate emanating, increased amount of home loan EMI. Worth a try? No for sure!! Take steps to continuously improve your credit score, to enjoy numerous home loan benefits with utmost ease.
Processing Fee
When you apply for home loan, always ask the lender about the imposed processing fee. It is an essential criterion to plump for a pre-eminent home loan offer. Unless you are all set to deal with clumsy situations, it is recommended to explore the cutting edges and then finalize the lender to get the best rates for home loan.
Foreclosure Penalties
Previous to sticking to any fascinating home loan scheme, go through the correlated foreclosure norms. Wondering why initially you should look into foreclosure penalties? Well, everything is uncertain, you never know when you decide to repay the loan amount in one go or count on balance transfer. In such circumstances, you will have to pay a notable amount as a foreclosure penalty. Thus, if you are already familiar with penalties you can plan everything accordingly. When you apply for home loan, even if you get approval at the best rates for home loan, you have a lot to pay for years in terms of home loan EMI. Thus, whenever you have access to huge funds, all you will look for is getting rid of an ongoing home loan. You might feel burden-free and happy, but the scenario will change drastically if you do not know about the prepayment penalty. Escape from such penalties by counting on appropriate home loan offers.
Reduce the Debt-to-Income Ratio
When a bank, financial institution, or a lender considers the home loan application, they closely examine the applicant’s debt-to-income ratio. The monthly debt obligations that are drawn by the applicant against the monthly income helps to gauge the paying capability of the borrower. To pass this eligibility criterion effortlessly, try lowering down the credit card balance, and amalgamate the dues into smaller monthly payments.
Juncture Funds for Future Monthly Instalments
At the minimum keep the verge of three months of monthly installment as lay aside. Looks like a small amount, yet this kept aside amount will turn out to be helpful if any unpredicted circumstance transpires. You will be able to pay timely EMIs with these reserve funds. Bear in mind that any sort of default in home loan EMI payments can spoil your credit score badly. So, better be prepared in advance rather than dealing with such situations in haste.
Read the Minutiae
No one wants to skip any small print details that can perhaps affect the finances at later stages. Everyone who keeps uttering to carefully read the terms and conditions is on the right part. You might think it’s a total waste of time, but it is not. You will come to know certain terminologies that can make you regret later. One must know about every minute detail of the procured home loan and for that, you will have to go through the fine print cautiously.
Co-borrower Can’t Claim for Tax Benefits Unless he is an Owner or Co-owner of the property:
A home loan is considered one of the foremost tax-saving tools. Not only the borrowers but even co-borrowers can avail tax benefits but there are certain restrictions. The co-borrower should be the owner or co-owner of the property to enjoy tax benefits. In-home loans the property ownership is a crucial criterion to grab maximum possible tax benefits on interest as well as a principal component. If the co-borrower is not listed as a co-owner of the property, then the only advantage he can avail is enhancing his borrowing eligibility.
Buying a Housing Loan Insurance Product is Not Necessary
When you apply for home loan to avail best rates for home loan, the banks and financial institutions usually ask to purchase any home loan insurance product. This is generally done at the time of loan approval. Although, investing in such an insurance product can be a costly affair. Without any doubt, the applicant should go for life cover especially while availing of housing finance. You should adequately protect the depends too. But the borrower has the option to get term cover from other companies too which will save huge costs. In addition, it is not mandatory to do so, but the banks might force you to play on the safer side. It thoroughly depends upon you and your priority what you choose.
Rights of a Home Loan Borrower
By now, you have a better breakthrough about crucial aspects that you must know while applying for a home loan, it’s the right time to move further to various rights of a home loan borrower.
While Applying for a Home Loan
When an applicant apply for Home Loan, banks/financial institutions/lenders are supposed to furnish the applicant with the below-depicted information:
- The applicable rate of interest
- The payable processing fee to avail a home loan
- The amount of application fee that will be refunded in case of application rejection
- The foreclosure and pre-payment charges
- The penalty amount in case of missed repayments
- Charges imposed to convert fixed interest rate into floating interest rate and vice-versa
- Other assorted clauses that can affect the interest rate of the borrower
At the Time of Loan Approval
After the crunching and approval of the Home Loan application, the applicant has the right to get familiar with the below-mentioned details:
- The acknowledgment of the home loan application
- The basic terminologies that govern the loan
- The loan sanction letter
- Access to the amortization schedule
- A written receipt of all the submitted documents
- A written receipt of deposited cheques
During the Loan Repayment Tenure
If an applicant fails to make timely repayments of the ongoing home loan, the lender follows up a predefined procedure for recovering the outstanding loan amount.
Following is the basic roughout of the procedure:
- Remind the home loan borrower via on-time notices.
- Follow up the principles of chivalry, fair treatment in addition to following up the RBI guidelines.
- Always keep the borrower familiar with the initiation of the recovery procedure against him.
- Only the duly approved representatives should be allowed to deal with the defaulter in a civil manner.
- Respect the borrower’s privacy regardless of the circumstances.
- The representatives are not permitted to contact borrowers apart from the mentioned time that is 0700 hours – 1900 hours. In addition, the representatives have to maintain dignity and decorum while carrying out the procedure.
- There should be no mental strain or harassment.
- Start of the action against the loan recovery if the borrower files a complaint.
After Complete Repayment
Once you have repaid all dues, you can ask the lender to provide mentioned documents, within 15 days of the final repayment date. If the lender fails to provide the documents on time, you can step forward and take action. Following documents must be collected from the lender at the time of loan closure:
- No-Due Certificate from the lender
- All original docs, property deed that was submitted as collateral to avail home loan
- Any unused cheque that was deposited to the bank at the time of loan approval
- Letter depicting final settlement of the home loan. It has to be signed by the bank official.
Wrapping Up
That’s a lengthy list to remember, yet worth reading. Being familiar with all crucial aspects, and rights you can get easy approval for home loans. Stay on top of your game, by knowing the rules and terms in advance. After having reliable knowledge about every minute of basics, you will not need to rely on someone’s advice in every phase of the loan procedure. Do it with your assistance with full confidence. Furthermore, we are talking about your hard-earned money, so invest it wisely. Be cautious, think twice before finalizing any home loan product.
