15 Things to Consider Before Taking a Home Loan

Home Loan Information In Gujarati : Generally, a salaried person can buy a house by taking a loan. If you are also employed and want to buy your dream home, you can do so with the help of a home loan. It is important to note here that buying a home or taking a home loan is one of the biggest decisions in life.

Home loans are taken for a minimum tenure of 20 years, so you are bound by the liability for the next 20 years. Similarly, if you are spending up to 30-35 lakh rupees or more in buying a house, then before buying this, you need to make a very tough decision.

Before taking a home loan, thoroughly assess current interest rates, bank terms and your income continuity. Since the home loan is due over a long period of time, don’t let it become a huge burden on you. Before taking a loan, visit four to five banks and get the necessary information. If your friends or relatives have taken a home loan recently, get the necessary information from them as well.

1. Loan Eligibility
   Home loan eligibility is determined based on your income and loan repayment capacity. A general rule is that the monthly installment of a home loan should not exceed 30-40 percent of your income.
2. Good credit score, cheap loan
   A customer’s credit score is extremely important to financial institutions that offer home loans, including banks. A good credit score gets you higher and cheaper loans. A CIBIL credit score of 750 to 800 is considered excellent. Credit score can be improved by paying your current EMIs and credit card bills on time.

Once you know your credit score, keep other documents ready including identity proof, address proof, income tax return related documents, bank statement, employer proof. If you have decided to buy a house, also collect the identity and address proof of the seller, title of the property, map, completion certificate to make it easier to get the loan.

3. What type of home loan
   The main types of home loans are – fixed rate home loan or floating rate home loan. Taking a home loan on a floating interest rate is a more popular option as it gives you more convenience.
4. Advantages of taking a joint home loan
   It is to your advantage if you are taking a home loan in common with someone. In such a situation, the bank considers the loan by adding the income of the co-applicants. Joint home loan offers tax deduction benefits to co-applicants. Some banks reduce the home loan interest rate by up to half a percent if there are female applicants. By taking a joint house, the burden of paying EMIs is also shared.
5. Use a calculator
   Never take a loan in haste. That is, one should think with a cold mind before taking a home loan. Before that one has to sit at home with a calculator and calculate the EMI. However, nowadays every bank has an online calculator, with the help of which you can know the EMI. After looking at the remaining expenses, calculate your EMI and take the loan.

6. Check for low interest rates
   What will be the interest rate on your home loan is very important. Being a long-term loan, even a 0.05 percent difference in interest rates can run into lakhs of rupees. Also, keep in mind that if you start a conversation with a bank today and you get a loan after three months, you will be given a home loan according to the interest rate applicable at that time.
7. Check the processing fees on home loans
   Banks charge a processing fee on home loans. It ranges from about half a percent to 1 percent. No bank even waives the processing fee as SBI is currently offering home loans at zero processing fee. Before taking a loan, you have to make sure that the processing fee does not hurt your pocket. Say yes to the loan only after calculating these fees.
8. See also hidden costs
   Loans involve various hidden costs which are not mentioned earlier. By the time you find out later, it’s too late. These may include legal fees, technical appraisal fees, franking fees, documentation fees, decision fees, notary fees, loan prepayment fees, switch fees, etc. These fees can put you in big trouble. So already know about the hidden costs.
9. Cost of your home loan
   You should apply for a home loan before shortlisting a property. The reason is that if you have shortlisted a property and you are not able to get a loan according to the area or that property then you will be in trouble.
10. Paying monthly installments
    Keep in mind that you have to repay the home loan taken by you to the bank along with the interest. If you keep the monthly installment amount low, your home loan tenure will increase. Similarly, if you give a small amount to the bank as home loan prepayment in the initial period, it will reduce your loan tenure significantly.
11. Tenure of Home Loan
    If you have taken a home loan jointly, all the applicants will also be property owners. You have to keep in mind that if your parents are co-applicants for a home loan with you, you should focus on clearing the loan quickly.
12. Documents required
    Even if you work in Ahmedabad, you can take home loan from Rajkot and buy property in Surat. Home loan is given by pledging your personal profile and property documents. If your documents are complete and the property is in an authorized location, there is no problem in taking a home loan.
13. Read all documents carefully
    However, reading home loan related bank documents is a cumbersome task as it is very voluminous and full of technical terms. However wherever possible

You should read it and try to understand it. For this, you can take help of financial content or loan related information sites. Try to read the small print in the documents carefully. It is important to read and understand the terms and conditions related to EMI payment properly.

14. Insurance Cover
    If you are taking home loan then you should take insurance cover. It can actually save your family members from becoming homeless in an emergency. Along with this, the monthly installment of your home loan is also waived in case you have an accident.
15. Default
    You have to pay your monthly installments regularly every month. If you do not pay three monthly installments in a row, the lending institution has the right to take action against you. If you are unable to pay the monthly installments of the home loan due to any financial problem, try to talk to the bank to clarify your situation. In this case your home loan repayment term will be extended.

List of documents required for home loan

Loan Application Form.

3 passport size photographs.

Proof of identity.

Proof of residence.

Last 6 months bank account statement/passbook.

Signature verification by the applicant’s bankers.

Details of personal assets and total debts.

Detailed property documents.

Salary certificate from employer.

Form 16/IT returns for last 2 financial years. (salaried persons)

Copies of last 3 years IT returns/Assessment orders. (Self-Employed Professionals)

Challan as proof of advance income tax payment. (Self-Employed Professionals)

Proof of business address for non-salaried persons. (Self-Employed Professionals)

Copies of last 3 years IT returns/Assessment orders. (Self Employed Entrepreneurs)

Challan as proof of advance income tax payment. (Self Employed Entrepreneurs)

Always insist on taking a home loan from an authorized bank. like,

• SBI Home Loan
• HDFC Home Loan
• ICICI Home Loan
• Axis Home Loan
• BOB Home Loan
• PNB Home Loan
• BOI Home Loan
• Kotak Home Loan