A Home Loan: 4 Things to Consider
It’s a dream come true to own the home you have always wanted. As a prospective home buyer, you think about two things: a pretty home and a not-so-pretty, usually inevitable home loan. Qualifying for a mortgage is most important. A lender must assess your ability to repay the loan, which is determined primarily on the basis of your earnings, expenses, savings, work profile, financial capability, and repayment history of any loans and other debt. Here are 4 important tips to check before you go for a home loan:
1. Check Your Credit Score: Your credit score helps determine how easy it will be to get a home loan. The score you receive depends on how frequently you pay your EMIs and credit card dues. In simple terms, your credit report (CIR), which contains your credit score, is the history of your borrowings from various institutions, such as banks or non-bank financial companies (NBFCs) or housing finance companies (HFCs). A trusted credit bureau prepares and maintains your credit records and shares it with the banks/lenders whenever an enquiry is made by the loan provider. The higher the credit score, the higher the chances of the loan getting approved. And also once can expect the best rate of interest on the home loan as a bonus. Ensure you check your credit score at least six months, preferably 12 months, before you plan to buy a home.
2. You need to determine your budget for buying a home, how much money you can use for a down payment, and how much of a home loan you will need. As a rule, you can get 80% of the value of the property as a home loan if your income is sufficient. You must identify the EMI range that you are comfortable with in order to decide on the loan tenure. You can play around with various options in helping you here using online EMI calculators. You can consider adding your parents or spouse as co-borrowers if your income isn’t sufficient.
3. Home Loan Document Requirements: Before you proceed with a home loan application, it is necessary to know the documentation that is required and ensure that it is in place before you approach a bank or housing finance company. You will need the following documents:
• Income Tax Returns or Form 16 for past 2-3 years make sure all taxes are filed
• PAN Card – Verifying the validity of the PAN will be done by the lender
• Aadhar Card – the bank would also do an Aadhaar verification to verify your identity
• Bank Statements for past 6-12 months for a bank account where your income and expenses reflect. Make sure you maintain a reasonable balance in this account over past 6 months.
• Last 3 Months Salary Slips if you are salaried
• Application Form with Photograph Duly Signed
4. Choose the right banks and lenders: Avoid applying to many lenders at the same time, as many credit inquiries can negatively impact your credit score. Select the banks or housing finance companies where you have good relations and the most important thing is to be in touch with the institution who already approved the property you intend to buy. Understand the eligibility criteria of such lenders in terms of the cutoff for credit score and the loan scheme (processing fees, the rate of interest etc.). Considering all of the above factors will help you prepare for your home loan and increase your chances of receiving a swift approval. If you’re considering co-borrowers, make sure you tell them to verify their credit score and maintain their documentation.
