Housing finance helps you accomplish one of your biggest life goals - buying your dream home. The housing finance market has evolved considerably over the years, with many lenders offering home loans. As a buyer, you are spoilt for choice. However, while opting for home loans, from housing financing companies, there are certain dos and don’ts, following which can ensure your experience is a smooth one. What are they? Let’s find out.
Factor in Affordability
When it comes to buying a home, we all like to stretch our imagination and wish for a little extra! Today, the Indian realty market offers ample choices to modern-day buyers. You can always choose to look beyond your budget and buy that villa you always wanted. However, there’s a catch.
If you buy a house out of your budget, you may need to avail a higher home loan amount and make a large down payment. Note that home loans are long-term commitments, and the EMIs could run for 10 to 15 years and even more. Other essential responsibilities such as children’s education and your retirement could take a backseat if you end up stretching yourself.
“Potential homebuyers should always consider other life goals and buy a home that’s well within their means as it benefits them in the long run. Getting carried away never helps,” opines a certified financial planner in Kolkata.
So, you must do your research and look beyond home loan rates and EMIs. Check if the lender gives the option of breaking the down payment into small chunks for easy payment. Also, find out if the lender allows you to pay smaller EMIs in the beginning and increase it later. This way, you can buy a bigger home without compromising on affordability.
Maintain a Good Credit Score
You can get home loan rates at affordable price points with a healthy score. Lenders will take into account this score, ranging from 300-900, to understand how well you are positioned with your finances and if you can repay the loan on time. Housing finance companies can either reject your home loan application or they can disburse the loan on stricter terms and conditions if your credit score is not healthy.
To enhance chances of availing home loan on easy terms and conditions, it is advised to maintain a good score by paying your existing EMIs on time and keeping your credit utilization ratio low. If you use a credit card, ensure to repay the dues on time and not just the minimum balance.
Research Well and Compare Multiple Offerings
Today, even when shopping for items like clothes, gadgets, etc., we research and compare before buying. Housing finance should be no different. As it’s a big-ticket commitment, it’s vital to research and compare offerings from different lenders. You can visit the website of your preferred financier or aggregator portals that list offerings from multiple lenders. In a few clicks, you can narrow down your lenders through these portals and find out more about them individually. Research goes a long way in ensuring that you bag the best deal.
Have a Co-applicant, if required.
Having a co-applicant always helps if he/she has a good credit history. It enhances home loan eligibility criteria and improves the chances of the loan application being processed quickly.
“My wife and I jointly applied for a home loan and got a significant reduction in interest rates as her credit score was better than mine. Our application was approved within a week, and funds were disbursed quickly,” says Atul Kulkarni, working with a private company in Surat who applied for a home loan last month from a leading housing finance company.
Find out if Repayment Options are Flexible or Not.
This is another essential lookout. Cash flows of individuals are not always the same, especially in times of Covid, and thus, one should opt for a lender that allows the flexibility to make repayments as per one’s current circumstances.
Be patient while opting for home loans. Rushing could lead to flawed decisions and be a cause of regret later. Don’t lap the first offer coming your way and keep on shopping until you find the best rates.
“Had I researched a little more, I could have saved 25 to 30 bps on home loan rates. I also had to pay a high processing fee,” rues Priyam Vedi, who availed a home loan last year. He wanted to arrange the funds on short notice and didn’t spend the time required on research.
Avoid Taking a Loan That You Will Find Difficult to Repay Don’t bite more than what you can chew. As said, home loan is a long-term commitment where you need to pay the EMIs for a good 10 to 15 years. Therefore, you must take a loan that you can easily repay. Home loan calculators available online can help you calculate the monthly EMIs on loans.
Easy to use, these calculators give you an idea of the EMIs that you need to pay towards your loan. Keep in mind other necessary expenses that you need to address and opt for a loan that you can quickly pay without compromising other needs and peace of mind. “Availing a loan that you can pay hassle-free keeps your credit score in good shape and ensures you don’t stress out unnecessarily,” says the financial planner.
Don’t Ignore the Fine Print of Loan Documents Before signing on the dotted lines, read the documents carefully, especially the terms and conditions. Most buyers ignore the fine print only to rue later. The fine print contains essential information regarding your loan, such as processing fee, penalty for late payment, foreclosure charges, etc., which shouldn’t be ignored.
“We sought professional help to understand every aspect of the loan we were taking. We didn’t want to take risks and therefore went through each statement carefully and made sure to understand them,” says Atul.
Check the Lender’s Reputation and not the Interest Rate Only While opting a lender for the home loan rate is desirable, it shouldn’t be the only criteria to make the choice. You must also check the reputation of the lender. Reputed lenders maintain transparency in their communication and ensure you know every aspect of the loan. They help you make the right choice.
Also, reputed lenders have a well-defined lending process in line with the regulations. They have a robust mechanism to evaluate applications and disburse the loan amount. They can also help you with repayment in case of any difficulty.
Don’t Keep Family Members Aloof About the Loan Ensure your family knows about the loan and acquaint them with the relevant details. It is essential as the onus of repaying the loan is on your family in case of your absence.
Also, if they know about the loan, they can help you plan your finances in a manner that helps in easy repayment. They can also help you in your exercise of availing the loan and aid you in making the right choice.
Godrej Capital is the financial services arm of Godrej Group which offers home loans, Loan Against Property and other secured loans. With innovative products and offerings, customers can get hassle-free loans on easy terms and conditions. Click here to know more about the offering.
Disclaimer:The above information is for illustrative purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision.