Applying for a Home Loan Soon? Big Mistakes to Avoid When Applying for One

With festivities around the corner, most people choose to complete their dream of owning a home around this particular time. However, with the inflation rate roofing the charts, and so are the property rates, most people need external monetary assistance to get their dream taking materialized. This is where the idea behind home loan comes in. The borrower submits an application for an Indian bank home loan and other banks based on the number of variables, and the bank sanctions the loan amount for a particular tenure and interest rate. In return, the borrower pays the 40 lakh home loan EMI or any other amount based on the total sanctioned amount. If you are planning to visit the bank for a home loan, there are certain aspects you should know about it. Here are the common mistakes that most people make while taking a home loan. 

Select the lender first: Before finalizing the purchase of a property, the majority of people want to know how much loan they will be eligible for. However, there is no particular need to visit your lender, such as an Indian bank home loan or any other one,  in order to understand the loan you will be eligible for. If you are under 40, simply multiply your (and your spouse’s) yearly gross income by four to obtain a ballpark idea of how much of a loan you might be eligible for. Finding out whether another lender has provided funding for another apartment in the same building after choosing your property is the best course of action.

Not taking any insurance cover: If you are planning to take an Indian bank home loan, your priority, apart from finding the affordable interest rate, is to get the appropriate insurance coverage to shield your family from unfortunate circumstances. Buying a home loan insurance policy can help the family in paying off the debt during unforeseen circumstances. There are many insurance products that cover home loans. Take out a life insurance policy for a sum that covers your debts and 40 lakh home loan EMI or any other amount you took out a loan for. The majority of borrowers do not know the risk involved in not protecting their liabilities.

Not calculating the down payment correctly: Many consumers purchase real estate that is still under construction, figuring they can pay the down payment proportionately while the Indian bank home loan covers the remaining balance. Before they make the initial payment on the property, all lenders, without exception, require that you bring in the full amount of the down payment.

Not doing window shopping: You ought to narrow down your selection of banks to four or five, then see which one of them offers a deal that is reasonable. Your capacity for negotiation has a big impact on how much your loan will cost. Keep in mind that loan terms and conditions are all negotiable. In addition to, of course, your creditworthiness, banks examine your income and repayment history when determining interest rates.

Falling for teaser loans: The State Bank house loan programme, sometimes known as the “8% programme,” is a great programme, but it does not cost only 8%, except for the first year. Many lenders today provide fixed interest rates which are on the lower side for the first few years before switching to standard floating rates. Understanding how such changes would affect your total EMI amount is important. 

Failing to check the eligibility for a home loan before applying: Your credit score is a key component used by lenders to assess your creditworthiness. Essentially, your credit score evaluates your credit and repayment history and establishes whether you are eligible for a good Indian bank home loan. Usually, 750 or higher is considered a good score. In fact, the better your credit score, the higher the chances of a bank accepting your sanctioned loan amount at a reduced interest rate. Therefore, it’s crucial to check your credit score and if it is low, make an effort to increase it before submitting an effective house loan application.

Conducting flimsy market research: Given that an Indian bank home loan is a substantial investment for most of us, even a small difference in interest rates can prove to be huge. As a result, you must carefully consider all of your options and choose a lender who provides you with the complete package, including a reasonable interest rate, favourable repayment terms, a larger loan amount, and more. Keep in mind that a loan is also a commitment. In particular, during emergencies, you don’t want to be tied to an unaccommodating lender. Before agreeing to the loan terms, be sure to read the fine print. Seek advice from experts and any borrowers you may know, or read reviews online. 

Not saving enough money for the down payment on a home loan: As you may already be aware, your lender will only loan you up to 75–90% of the value of the property. Before availing, you may get a loan, and the remaining money must be paid in the form of a down payment. Therefore, it is important to ensure you have an adequate corpus on hand without having to sacrifice your other emergency funds in order to cover the corpus. Additionally, if you can, try to put as much money down to lower your overall loan amount and receive a better loan deal. 

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Overestimating your ability to repay your EMIs

It is best to evaluate whether you are ready to pay a certain EMI, for example, 40 lakh home loan EMI, amount for a specific tenure, before accepting a house loan. Here, borrowers frequently commit the error of agreeing to higher EMIs by accounting for future income increases, which puts them at risk of non-payment in the future. You shouldn’t owe more than 40% of your salary in total house loan EMIs. If that’s not the case or you have large monthly expenses, take everything out of your budget into account before choosing the appropriate EMI amount. You can determine the best amount based on your ability to repay the loan using the home loan EMI calculators.

We understand that purchasing a house is a highly emotional decision. But do we adequately plan while taking out a home loan? Since getting a home loan is a costly and long-term commitment, it takes research. You should know beforehand whether you will be able to pay off the 40 lakh home loan EMI. Without conducting adequate research, borrowing could harm your financial situation. You must exercise extreme caution when applying for a house loan to avoid choosing a provider or a product that is unsuitable for you. Apart from keeping the points above in mind, also check various charges like processing fees, pre-payment charges, legal fees, valuation fees and other associated costs.