(Disclosure: This blog post is sponsored by Credit Sudhaar)
Buying a house is a dream of one and all. There is certainly great demand for purchase of residences and a matching demand for home loans. In today’s age of soaring property prices, buying a property for self-consumption seems like a distant dream. Thus, hardly anyone can achieve it without seeking external financial assistance. In fact, builders include it in their sales pitch and even offer to help to find a suitable lender.
To reach one’s goal of having a home they desire, one has to get past several challenges. Monetary constraints are the biggest obstacle in their path. A lot of people have found that with the help of home loans they can steer clear of most hurdles and achieve their goals sooner than they thought. Home loans can be taken for land purchases, house purchases and for home improvements. There are home construction loans available too that help you build the house of your dreams on a plot of land you own.
Home loan is a secured form of debt. Although relatively easier to get but there are quite a few factors involved before a lender signs the dotted line on the sanction letter. Here is a checklist of things you must do before you decide to take the plunge:
- Creditworthiness: This factor is primarily determined through your three digit credit score and CIBIL report. Lenders do a credit check as a first step in evaluating your application. Before you apply for a home loan, seek a copy of your credit report and go through it to determine what a lender would notice in it. If you find any errors in your report then do raise a dispute to have them rectified. Work to having a better score even if you are in the 750 or more bandwidth.
- Age Factor& Tenure:People in their early 20s or 30s will find it relatively easier to get home loans rather than those in their 50s. The tenure for a standard home loan is roughly between 20 – 30 years. Thus, where an individual in their 20s can take advantage of a long tenure, thereby reducing impact of EMI and spreading the burden over a longer tenure. Whereas, a person who is, suppose 53 years old, may have to pay off the loan in a shorter tenure, for example in 10 years. Although this means that the older person would be paying little interest as compared to the younger one but the former one will have to bear a very high EMI and unless the income permits, it can be a cumbersome task.
- Economic Bracket & Job Stability: Your level of income, the nature of your job and your employer are all important factors that a lender looks into while scrutinizing your loan application. The higher your income, the less risky nature of your job, if your job is quite stable and your employer has a good track then you are likely to get a higher loan value.
- Outstanding Loans:Prior to giving a thumbs-up to your loan application, lenders like to assess your current debt burden. Since existing gross EMIs affect a borrowers repayment capacity, it is advisable that you close down on any of your currently active loans, repay them in full and make sure that you debt to income ratio is low. Don’t think you will not get a home loan for bad credit score. Rather get someone to guarantee your loan application and you will be good to go.
- Co – borrower or Guarantor:When a person who falls in the higher age bracket applies for a loan then having a younger person co-sign the loan application helps increase the chances of loan being approved. This is so because the eligibility and repayment capacity increases.
- Miscellaneous Factors: There are quite a few more factors that impact your loan evaluation process like the amount of down payment, whether the residential project is approved by the bank or not and your documentation should be authentic and complete.
- Document Checklist: In the preliminary stage of your plans to apply, make sure you have all the necessary documents ready to avoid last minute rejections of your loan. The following is a list of the main documents you will need:
- Complete and duly filledloan application form
- Identity Proof
- Address Proof
- Proof of age which can be same as identity proof
- Proof of income – salary slips, bank account statements, etc
- Proof of employment
- Tax returns for last three years.
All in All
A lot of people apply for home loans in the hope of owning a perfect abode for themselves. The fact that home loans offer added benefits like tax rebates is like cherry on the top. In India currently, SBI, HDFC, LIC Housing Finance, ICICI Bank and Axis bank are the key players in home finance offering competitive interest rates. There are several banking and non banking financial institutions that are willing to lend to prospective home owners. Doing a due diligence before you zero in on your pick of lender is a smart move.
Be prepared with all the documentary proofs and envision your meetings with the lender. If you have the slightest of doubts then seek help of expert credit consultants to sail through your financial dealings.