Factors To Consider While Deciding For A Home Loan

Home Loan plays a vital role for buying a property or apartment. Today process of applying for Home Loan is simple and getting a Home Loan is easy compare to decade ago. Today as an investor or a home buyer, you assume that you should take a Home Loan for investing or buying your dream home. But, do you really evaluate your need, income and affordability before applying for it? Here are some factors that you should consider while deciding your need for a home loan.

Know your Home Loan before applying

Today Home Loan is a buzz word for property buyers, real estate experts and investors. Before you apply for Home Loan, ensure you know your income and understand how much loan you can afford. Here are some factors that you should consider while deciding your need for a home loan.

• How much loan you can afford: This first and important factor you need to consider before you apply for your Home Loan is the affordability of the property. Because you will be expected to pay around 20% of the property value that you intend to buy as down payment to the developer. Rest 80% can be taken as Home Loan. Costlier the property, bigger the loan you want, more the money you will have to put up towards the down payment.

• Income Stability: If there is a risk of losing or leaving your job, you should avoid taking Home Loan. You must analyze whether your income will be able to support the EMI on your home loan or not. You should analyze considering your current monthly expenses, expense in future or in case of emergency etc. When there is a possibility of an interruption in the income, it might not be prudent to take on a huge EMI obligation.

• Types of Home Loan: There are thousands of home loan companies waiting to provide you with your financial needs. It is always advisable to consult an independent home loan expert or consultant before applying for a home loan or purchasing a property. There are different types and schemes of Home Loan where you need to choose the scheme or Home Loan that suits best for your requirement. Sometimes loan rates might also vary depending upon the end use, so be informed about it before applying for a wrong kind of home loan.

• Buying or Self-Construction: If you are buying property from a developer, you can either opt for a ready for delivery property or an under-construction property. You need to provide the lender with details like a copy of the sale agreement of the property, regulatory clearances, commencement and occupation certificate. For a self-construction property, you need to provide the lender details of plot acquisition like the title deed, the sanctioned construction plan from the architects, and a complete construction cost breakdown. The disbursal can be a lump sum payment, or based on a construction-linked plan.

• Second Home Loan: If you already have a home, you can invest on second home. If your first home or property Home Loan is cleared or paid off, you can raise a loan against it for making another investment. In such a situation, you can take a Loan against Property (LAP).Interest rates for LAP might be different from other types of Home Loans.

• Credit history: Credit history is a report which documents anything related to how an individual managed his credit. It includes information on your borrowing and repayment of credit cards, bank loans, car loans, mortgages and any other debt owed to a creditor. Lenders, such as banks and credit card companies, use credit history to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. If you have a good credit history, the lender may even be agreeable to give you a loan for a higher amount at a discounted rate.

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There are many home loans provider in the market to make your dream come true. There are different types of home loans tailored to meet your needs such as Home Purchase Loans, Home Extension Loans, Home Improvement Loans, and Land Purchase Loans etc. You can also approach a lender for a loan for repair of an existing property that you own. To get a loan for repair of a property, you first need to get clearances from the concerned authority for further construction.

Your Home Loan need is based on your personal requirements. Understand what specific need you have from your loan type so that you don’t take a loan for the wrong purpose. You must analyze whether your income will be able to support the EMI on your home loan or not. Other than 20% down payment, you will also need to pay other expense such as processing fee, bank expense etc. So don’t just blindly take a loan, know your need, how much you can afford, your monthly income and choose the Home Loan that suits you best.