Homebuying and applying for a home loan can be a long, multifaceted process. Here are some hacks to help you stay grounded throughout the process and get the best out of it:
1. Start by using a home loan eligibility calculator
Before applying for a home loan, you should use this free, online helpful tool. A home loan eligibility calculator gives you an idea of the amount of home loan you will most likely be approved for based on your financial profile. This will clarify your homebuying budget and how you can enhance your application.
2. Have a repayment plan in place
It is very important to understand your borrowing cost and how much your home loan Equated Monthly Instalment (EMI) will come up. This is because a home loan is a long-term commitment, and you need to ensure to meet your EMIs regularly. For this, you can use a home loan EMI calculator. A home loan calculator will help you estimate your home loan EMI so that you can budget and plan accordingly financially.
3. Check your credit score
Lenders check your credit score to assess your creditworthiness to determine your home loan eligibility. A high credit score enhances your home loan eligibility and helps you get a lower home loan interest rate. Hence, make sure to check what your credit score is before you apply for a home loan.
4. Improve your credit score
If you have a low credit score, you should try to improve it before applying for a home loan. You should clear all your dues, prepay, and close debt such as unsecured personal loans if possible.
5. Arrange the down payment
Applying for a home loan will only be approved for about 80% of the property value. The down payment is the remaining 20% of the money you will have to save and pay. While this percentage can differ, in India, usually, most lenders require at least a 20% down payment.
6. Save for stamp duty
Besides the down payment, you should save money for stamp duty and registration charges. These are important homebuying costs that will not be included in the home loan amount. Using a stamp duty calculator, you can calculate the stamp duty on the home you want to buy.
7. Gather all required documents
To have a seamless home loan experience, you must understand and gather all the necessary documents for a home loan. This includes your KYC documents, income proof, property documents, and more.
8. Understand how housing loan interest rates work
Understanding the difference between fixed and floating housing loan interest rates and determining which works best for you is crucial. You can discuss this with your preferred lender, and they can help you narrow down the right option.
9. Compare different lenders
The home loan interest offered, the customer service provided, the ease of application, and the home loan terms all differ depending on the lender. It would be best to compare all these factors before finalizing a lender.
10. Figure out your tax savings
Applying for a home loan makes you eligible for various tax deductions under the Income Tax Act of 1961. It would help if you used a home loan tax saving calculator to figure out your tax savings and how that will help reduce your home loan burden.
Financial planning, knowing what is required at every step, and comparing your options is the key to having the best home loan experience.