Find the best home loan to buy your dream house with ease
With India’s real-estate sector witnessing high rates, it can be challenging for any individual to self-finance the purchase of a house. Hence, acquiring credit to fund the purchase is a go-to option for most individuals.
Home loans are one of the most commonly acquired credit instruments in India. According to an article published in the Mint, India’s home loan market registered a year-on-year growth of 9.6% in terms of portfolio outstanding (PoS) in Q3 of FY2021. However, individuals must first know what is home loan, and how to choose a suitable one.
A brief overview about home loans
A housing loan is a secured credit instrument that individuals acquire to purchase a house. Since it is a secured form of borrowing, individuals need to pledge property to the financial institution. The property is pledged to the lending institution as a security until the credit is repaid. The lender holds the property’s deed or title till the borrower repays the credit along with the applicable interest.
Besides knowing what a home loan, individuals must know the various factors to consider while applying for this credit instrument.
How to choose the best home loan?
Keeping in mind these below-mentioned factors will help an individual choose the most suitable home loan offer with ease:
- Know home loan eligibility criteria
Individuals must check eligibility parameters with a concerned financial institution prior to a loan application. They can use a housing loan eligibility calculator for this purpose. This will let them know the loan amount they are eligible for depending on their credit score, income, and other factors. The higher the credit score, the greater the loan amount an applicant will be eligible for.
Individuals searching “how to check CIBIL score” can simply determine their credit report by visiting the website of any renowned financial institution. They only need to input their personal details and verify their identity to view their CIBIL reports.
- Conduct thorough research across multiple lending institutions
In order to choose the best home loan, individuals must check out multiple lending institutions before finalising their choice. The interest rates offered on a credit instrument vary across lenders. Individuals must opt for the most suitable one as this rate is directly proportional to the payable EMIs. Individuals can use a home loan EMI calculator to get an idea of the most suitable interest rate.
Prospective borrowers must also note that there are two types of housing loan interest rates – floating and fixed. Individuals must keep in mind that a floating interest rate is affected by changes in the financial market while a fixed rate is not.
Existing borrowers can opt for a home loan balance transfer if they find a lending institution providing a lower interest rate.
- Consider the processing charges while calculating the total loan cost
Some lenders charge around 0.5% to 1% of the loan amount as a processing fee, while some waive it off. Some lending institutions involve third party firms to scrutinise an applicant’s documents. This expense usually gets included as the processing fee. Prospective home loan applicants must consider the processing fees while calculating the total loan cost.
- Arranging all necessary documents
Generally, the list of documents includes the latest salary slips authenticated by the concerned employer, identity proof, address proof, passport-sized photographs, IT return forms, bank statements of the last few months, etc. Prior to applying for a housing loan, applicants must be aware of these and keep them ready.
Potential loan applicants who are aware of what is a home loan must ensure to choose a reputed lending institution for acquiring the credit. This will allow them to benefit from several pre-approved offers that are extended on secured and unsecured financial products. These offers help simplify and accelerate the lending process. Applicants can check their pre-approved offers by providing a few details, such as their names and contact numbers.
Besides knowing what is a home loan, individuals must keep in mind the above-mentioned factors related to this credit instrument.