All you need to know before applying for a Home Loan

All you need to know before applying for a Home Loan

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A home is considered to be among the most prized possessions in an individual’s life. For those who live on rent, moving on to a self-owned property is always a cherished dream and a milestone event in their life. The rentals, after all, that one pays as a tenant remain a sunk cost while the same, if diverted towards owning a property, can help create an asset for a lifetime.

If you are falling short of funds to purchase your dream home, you can apply for a home loan from a home loan lending institution. The road that can take you to your own home is straightforward and can be conveniently travelled by putting a few key things in place.

But, before you apply, it’s better to do some homework and consider a few important points other than just the home loan interest rate. Let’s see what they are:

  1. Find out your eligibility – The first thing you need to find out from the lender is your home loan eligibility. The amount of loan that you are eligible to get will depend on several factors, including your age, income, spouse’s income in case of a joint loan, tenure of loan etc. Essentially, it is your repaying capacity as a salaried employee or as a self-employed individual that is the key. This determines how much amount of home loan you can avail.
  2. Down payment – While checking your eligibility with the lender, an important factor will be the amount of down payment, i.e. the amount that you pay as a percentage of the home value up front. Lenders typically ask for a down payment of about 20 per cent of the home value and lend the balance 80 per cent of home cost. For example, if the home costs (as per circle rate) Rs 60 lakh, the lender will ask the borrower to pay up Rs 12 lakh (20 per cent as down payment) before sanctioning the balance Rs 48 lakh (80 per cent) as a home loan. The loan-to-value ratio, in this case, is 80% and most lenders are comfortable in providing loans if this level of LTV ratio is maintained.

You should discuss with your lender about ways to increase the eligibility, which may be enhanced by either adding the spouse’s income, if applicable, or by choosing a longer tenure of the loan or even by increasing the amount of down payment. You may also explore the possibilities using a home loan EMI calculator and a home loan eligibility calculator to find out the various options to enhance your eligibility.

  1. What interest rate applies to you – Every lender will have a base rate or the rate below which it will not lend to borrowers. But, the actual home loan interest rate may vary across lenders and also basis individual eligibility. Therefore, based on your loan amount, tenure, gender, profession, credit profile, income, etc., find out from the lender, the rate of interest applicable to you.
  2. Loan options – While exploring the lenders, keep an eye on EMI per lakh, which in turn will depend on the home loan interest rate applicable to you. In addition to opting for lowest EMI per lakh, ask for details such as the maximum loan amount and the maximum tenure of loan that you can avail from the lender. A longer tenure of, say, 30 years will help you keep the EMIs lower. However, the overall interest cost while opting for a longer tenure will be high. The better way out is to opt for a longer tenure and then prepay the loan as early as possible.
  3. Documentation process– Ask the lender about the documentation process and the specific requirements based on your profile. Also, find out how much time will the lender take for sanctioning the loan after submission of all the required documents. Generally, for salaried employees, the loan gets sanctioned in maximum 5 working days while for entrepreneurs or self-employed individuals, the process may take up to 8 business days.
  4. An eye on charges – Make sure you opt for a lender which is transparent in showcasing the various charges of a loan. From processing fees and legal charges to charges incurred during the foreclosure of a loan, you should keep an eye on all these before applying for the loan. Typically, there are no prepayment charges while paying from one’s own sources, but there could be foreclosure charges with some lenders. It’s always better to get clarity on these factors before proceeding.
  5. Customising loan – A home loan is for a longer duration and circumstances may change over time impacting your repaying capacity temporarily. Find out from the lender, if the loan can be customised as far as paying EMI is concerned. Some lenders may offer Flexible EMI Plans, thus helping borrowers in the time of need.

Key to choosing the right home loan

One crucial parameter while exploring a lender is to find out how transparent the lender is while disseminating information about their home loan. Check the lender’s website to know the eligibility conditions, documentation process and the process to apply for the home loan. When it comes to choosing a lender, Tata Capital ticks all the right boxes.

Tata Capital allows one to apply for a home loan online by furnishing basic information and uploading documents digitally. What’s more, Tata Capital ensures that the trust is maintained between the borrower and the lender by keeping the home loan application process as simple, easy and transparent as it can be. It is always the best time to take the first step to own your home and what better way to start the journey with Tata Capital, the name you can rely upon for a fair deal!

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