Choosing the right bank from where you get your home loan can be a bit tricky as home buying happens to be the biggest and most important financial decision that any family takes in a lifetime. Once the home has been financed and the down payment is made, a bank is to be finalized to finance the rest of the payment.
There are a number of factors which come into play here like the eligibility criteria, interest rates, processing fee and other factors. Here is a look at some of them to help you determine the best bank to help you finance your dream of buying a home
- Loan amount and eligibility: The monthly income of the individual is taken into account here, on the basis of which it is decided how much loan the person can avail. The loan amount is also determined by the value of the property and about 80% to 90% of the property value is covered and so the borrower needs to arrange for the down payment beforehand.
- The rate of interest: The EMI and the interest rate would depend on how much the borrower is able to spend from his monthly income each month on these requirements. Opt for a bank with the lowest interest rate and ask whether the interest rate is fixed or floating. If there is a scope of the interest rates falling, then you must opt for floating rates and if there are chances of the rates increasing then go for fixed rates. Remember, that you have to pay for this amount from your own pocket each month, so do not bite off more than you can chew.
- Processing fee and prepayment term: When you are applying for a loan, some banks will charge a fee for the processing of the loan and for the loan application. This can be anywhere between 0.25% and 2% of the total loan amount. Try to find a bank which has the lowest processing fee on the loan.
- Revisions on the loan rates: It is important to always keep a check on the bank to see if there has been a change in interest rates and these changes are often made by the Reserve Bank of India. This is for those who have opted for the floating rates of interest so that you can make the most of it when the RBI lowers the rate.
- Documentation: The bank requires some documents when they will sanction the loan and the process will only go through once the information has been verified. The banks mostly require Photo ID and Age Proof, Address Proof and the IT returns for the three consecutive years, which is the same for all. For salaried borrowers, one would have to provide the salary slip of the last six months and the bank statement of the last three months. Those who are self employed or have their own business will have to provide the TAN as a business proof, along with sales tax documents. Apart from these, the creditors could ask for any other document as per their requirements. Additionally, documents may be required for verifying income of the applicant if there are any additional sources of income.
- Turnaround Time: Do your research and try to choose a bank which takes the least amount of time to process and disburse the loan amount. Try banks which have a good reputation with turnaround time and have a reputation for offering good customer service after the loan has been disbursed. This comes in handy whenever you have queries about your loan.
You must always keep in mind a few factors while applying for a home loan. According to the rules of the RBI, 100% of the property price is never allowed. Bank can finance about 80 to 90% of the home price only. One must keep all the above mentioned documents in order like identity proof, age and address proof, income proof and other documents along with documents showing that you have booked the property and passport sized photographs. It should be noted that the home loan makes one eligible for tax deduction so do consult your financial advisor regarding the same.