Undoubtedly, home loans are a great help when you want to purchase your dream home. With home loans, you need not exhaust your hard-earned savings or dig into your investments. However, these loan offerings are long-term commitments. The equated monthly investments (EMI) you pay towards the loan can significantly affect your finances. Therefore, you must be careful while applying for a home loan and avoid things that can push you into a debt trap.
Following is a list of some do’s and don’ts you should remember while applying for a home loan:
Do’s
- Check your budget
Before you apply for a home loan, check your budget. Determine the amount of money you can comfortably repay. Assess your expenses and income to do so. Ensure that you factor in other financial goals, medical emergencies and contingency funds before deciding the loan amount. You can use a home loan EMI calculator to determine your affordability.
- Research
You must avoid applying for a housing loan with the first lender you come across. You must consider the different options available in the market and check lenders based on their home loan interest rates, features, customer services, top-up loan facilities etc. You can even negotiate with the lenders to get the lowest home loan interest rate if you have a good credit score.
- Avail a joint home loan if needed
Check your eligibility before availing a loan. If you do not meet the eligibility criteria, you can avail a joint home loan. Applying for a housing loan with a co-applicant enhances your eligibility and makes approval easier. With joint loans, you can also enjoy benefits like higher loan amounts, enhanced tax benefits and lower interest rates. However, also be aware of the liabilities and challenges of a joint home loan.
Don’ts
- Delay in EMI payments
Do not ever miss out on EMI payments. Defaulting in EMI payments can affect your credit score. Lenders can charge you a penalty and late payment fee. If you miss EMI payments more than thrice, they can also auction your property to recover the amount.
- Apply with multiple lenders simultaneously
Avoid applying for a home loan with multiple lenders at the same time. Apply with a single lender and if the loan application gets rejected, wait for some time before you re-apply. Also, ensure that you have a high credit score, preferably above 700, to improve the chances of approval.
- Ignore the fine print
The fine print of the loan agreement contains crucial terms, conditions, and information about your home loan. Before you sign below the dotted lines, do not ignore the fine print. Read about all the charges and the aspects related to default carefully. It would be best to discuss things with the lender in case of any doubts or queries.
Even a small mistake on your part while applying for a housing loan can prove to be very expensive in the long run. Therefore, ensure that you fill the application form accurately, furnish the updated documents and go through the required documents before you apply for home loan.