A shelter is what we all look for. Buying a home is the dream which all us cherish. So when you have taken the decision of owing one, and is about to apply for home loan and paying your processing fee, make sure you analyze the following aspects:
Maximum loan eligibility: Home loan lenders generally provide 80 per cent of the value of the property as the loan amount, subject to your income. The loan amount to be sanctioned depends on your income and previous track record when it comes to repaying your loans and credit card dues. They only consider the income heads which can be used to repay your loan. For example, your LTA and medical allowances are deducted from the monthly net salary you receive. You are expected to spend the amount received under these heads for the specific activities they are being provided for. This is one of the reasons why we generally see a difference in the eligibility amount quoted in the website and actual amount realized once the application is processed.
CIBIL score: Credit Information Bureau (India) Limited (CIBIL) provides a credit score on a scale of 300 to 900 based on your previous credit card usage, how you maintained your bank accounts, any check bounces, existing loans, uninsured existing loans, loan repayments, how many times you have applied for a loan or a credit card. Individuals with a CIBIL score greater than 700 are more likely to get a home loan.
Interest rate: It is important that you know the difference between fixed rate home loan and floating rate home loan. If you opt for a fixed rate home loan, the EMIs don’t vary over the loan tenure. In case of a floating rate home loan, the interest rate is determined based on the prevailing base rates plus a floating rate.
Loan tenure: The monthly EMI is inversely proportional to loan tenure, i.e., the longer the tenure the lower the EMI, and the shorter the tenure, the higher the EMI. Similarly, the total interest paid is directly proportional to the loan tenure. The higher the tenure, the higher the total interest paid, and vice-versa. Know the impact of your EMI payments on your finances before deciding on the loan tenure.
Check documents carefully before you sign: Check the documents to ensure that the terms are the same as what you negotiated and agreed upon. Read the documents carefully and know the different charges applicable. Importantly, know the processing fee, late payment fee, etc.
With Inputs From Nitin Vyakaranam is the founder and chief executive officer, ArthaYantra