Factors to Consider before applying for a Home Loan

Before applying for your home loan you should keep in mind some vital factors such as

• Rate of interest

Interest rate determines the amount of EMI you will pay. Select a viable percentage which doesn’t pinch your pocket too much and moreover, doesn’t eat up all your income. Home loans generally have 2 kinds of interest rates i.e. fixed and floating. In case of fixed, the rate of interest doesn’t change whereas in floating, it fluctuates as per market conditions and change in government policies. Consumers have an option of switching from fixed to floating or vice versa at any point of time during their loan tenure. Nonetheless, banks may charge a fee for the switch or in some cases the facility might not be available in your chosen home loan. Always clarify these doubts to avoid any hassles later. In addition, it is a good idea to get your credit score from CIBIL prior to applying for a home loan to receive competitive rate of interest and higher financing.

• Processing fees

Each home loan lender charges a certain amount of processing expenses for carrying out the necessary documentation of your loan. This fee is generally 0.25% to 2% of the loan sum. Although it seems like a small amount, it can increase your home loan expenditure considerably. Some banks offer schemes in which the processing charges are waived in order to draw more buyers. Try and look for banks which levy minimum or no such fees.

• Documents required

Apart from the basic application form, most home loan companies ask for documents such as residence and valid photo ID proof, bank statements, salary slips, income tax returns, processing fee cheques etc. However, it might vary at times so it’s suggested that you verify if there are any other documents which need to be submitted. Incorrect/late documentation can hamper the loan approval process.

• Sanction Period

Usually, home loan approval takes approximately 5-7 days if all the documents are correct. But this duration may vary for different banks. Do some research online or speak to friends who have opted for home loans and understand which bank has a good reputation and efficient disbursement.