If you are applying for a home loan, you should keep quite a few things in mind. The first thing to know is the rate of interest, i.e. whether it is a fixed interest rate or a floating interest rate. The former is when the rate of interest remains the same for the entire tenor of the loan while the latter indicates that rates of interest will keep changing periodically based on market fluctuations. You should always negotiate interest rates if you have a good credit score. Always see whether you can angle for a lower rate of interest and also check for hidden fees and charges including processing fees, foreclosure charges, prepayment charges, penal charges and the LTV (loan-to-value) ratio.
Try and maintain a CIBIL score that is above 750 at least in order to get your home loan sanctioned smoothly. You should always try and repay costlier debts like credit card repayments and personal loans. Maintain a healthy balance between secured and unsecured debt and ensure that your ratio of debt is lower in proportion to your income. You should also check your home loan eligibility criteria carefully. You can use an online home loan eligibility calculator for this purpose. Remember that 40-50% of the salary of an applicant can be allocated for repaying the home loan.
Loans are usually sanctioned to those applicants who have stable professional employment and a regular monthly income source. Those who have unstable employment are considered as high-risk borrowers. You should always consider overall affordability if you are applying for a home loan. Make sure that the loan is accounted for every month in tandem with other monthly expenditure like insurance and investments, education of children, rent if applicable, household costs and so on. Use an EMI calculator to work out how much you need to repay every month. Home loan balance transfer is where borrowers can transfer their home loans to another lender in case they get lower rates of interest. However, there are pre-payment penalties imposed in case you transfer your home loan. Balance transfer should only be executed in case there is a major change in interest rates and you get higher savings.
Check the home loan tenor which usually ranges between 15-30 years and you should decide on the best one as per your requirements. You should also check on the number of dependents which is something that most lenders check. The more the number of your dependents, the lower your chances of getting a home loan at a lower rate of interest. This is because the financial institution assumes that in case there are more dependents, then the repayment ability goes down for the borrower since the monthly salary will be spent in a higher portion on dependents. Make sure that you carefully ascertain all these factors before applying for your home loan.