There are a number of important tips you should follow when availing a home loan. Your credit history will play a major role in determining your loan amount. You should also be aware of the processing charges. These fees vary from bank to bank but are generally 1% of the loan amount. Be sure to plan your down payment before applying for a home loan. It’s best to apply for a loan from a bank where you have a relationship. This will ensure they have all your details.
Home loan interest rates are another factor to consider. You should know the different types of interest rates before choosing a home loan. The fixed interest rate is the most popular type and doesn’t change over the course of the loan. The floating interest rate, on the other hand, is calculated based on the MCLR and varies over time. Choosing a floating home loan can be beneficial if interest rates are expected to decrease in the future.
Regardless of the type of home loan you choose, your income level and property value will determine how much you can borrow. Most banks offer up to seventy-five percent of the total property value, but aggressive lenders will offer up to 80% or more. Banks also assess your repayment capacity based on your income, other liabilities and cash-inflow. While choosing the amount you want to borrow, try to keep it at or below 40% of your net household income.
Maintaining a good credit score is also very important. You should remember to pay your debts on time and maintain a good credit score. This will help you get the best home loan rates, as banks will be more willing to extend you a good loan if you have a high score. Also, a high CIBIL score will ensure you receive your loan faster and with less interest.
Finally, you should always keep in mind that a home loan is a long-term commitment. Make sure you plan for your loan EMIs for at least six months. Additionally, you should always have an emergency fund in place to cover any unexpected circumstances. The funds can be saved in a high yielding savings account or fixed deposits. You can also park some money in a short-term debt fund.
Before applying for a home loan, it’s important to review the terms and conditions of the loan. Make sure you are aware of any fees, penalties, and other conditions associated with the loan. This way, you’ll avoid any unpleasant surprises down the line. Moreover, it’s best to understand the terms and conditions of the loan before signing the paperwork. This will help you make a sound financial decision.
Your credit score also plays an important role in getting a home loan. A good credit score will help you secure a low interest rate. Hence, make sure to check your credit score before applying for a home loan. Try to clear any past dues and find ways to improve your credit score. You must also account for all other expenses associated with the loan. A credit score of seven hundred or more is considered as an excellent deal.