Buying a house is one of the most important decisions in an individual’s life. Most people apply for home loan plans to cover the finances required for a property purchase. Now, while a home loan can be a great way to arrange for financial assistance, it is also very important to think about this decision before speaking to a financial institution. This is to avoid any problems when it comes to repaying the loan. A home loan usually involves a big amount, and not planning it properly can cause unnecessary difficulties which would then even affect your credit score.
So, to make sure there are no problems with your home loan plan, take a look at 10 crucial factors that need to be considered before applying for one:
- Maintain a good credit score
Any financial institution will check the credit scores of their applicants before approving any applications. Since a home loan usually involves a big amount, lenders are very strict about the credit scores of home loan borrowers. Ideally, it is considered best for borrowers to maintain a credit score of 750 or more.
- Try and place a high down payment
A home loan does not cover the entire cost of the property. Based on the loan amount, the loan can cover up to 75%-90% of the property cost and the remaining amount would have to be covered by the borrower. This is known as the down payment. By putting a higher down payment, you are reducing the lender’s risk of offering a home loan. This makes it possible for them to offer you better terms, such as a lower home loan interest rate and flexible repayment tenure.
- Keep a good employment record
No financial institution would prefer a borrower with an unsteady employment record. Make sure to establish stability working for a good organisation and earn a decent monthly income. Avoid changing too many jobs frequently, as lenders can take this as a sign of job instability. This improves the chances of lenders offering home loan plans with favourable terms.
- Make use of a home loan EMI calculator
Before applying for the loan, it is essential to be aware of the loan’s monthly instalments. This is to ensure that there are no repayment problems in the future. So, it is better to make use of a home loan EMI calculator to find a plan that is suitable. The calculator also lets users try out different combinations by inputting different values for the loan amount, interest rate, and repayment tenure. This helps in arriving at an EMI value that is convenient for your budget.
These are a few factors that need to be kept in mind before applying for a home loan. Also, it is advisable to check with the lender regarding the documents required for a home loan. This is to ensure that there are no problems in the documentation process.