The Dos and Don'ts of Home Loan Applications

Home loans are a boon for home buyers. With the real estate sector experiencing a never-ending boom, it has become nearly impossible for middle-class people to afford the upfront cost of a home. Home loans allow home buyers to buy their dream home now and pay for it in an easy and affordable manner over the years. Lenders make money by charging interest on the loan amount. Applying for a home loan is also easy now with most lenders offering online home loan application services. This helps applicants save time and energy. Further, lenders have also become slightly relaxed about home loan eligibility requirements, which has made it further easier to get approved for a loan. However, if you are planning to apply for a home loan and wish to experience quick housing loan approval, here are a few dos and don'ts that you must keep in mind.

The Dos of Home Loan Applications

Do Thorough Research

The popularity of home loans has increased considerably over the past few years. Today, majority of home buyers take a home loan to fund property purchase. However, many home buyers make the mistake of not doing proper research. There are many lenders in the market and not everyone will offer you the best home loan deal you can get. Home loan borrowers must, therefore, do thorough research before accepting a housing loan deal. They should talk to as many lenders as they can and negotiate with each lender for a better loan deal. In the end, they should choose to go with the lender who is reliable, trustworthy and reputed and also offering them a good home loan deal.

Check Your Credit Score

Credit information bureaus perform the important task of assigning credit scores to credit users. The credit score is a three-digit number that is important because it tells a lender a borrower's intent of repaying the loan money on time. A high credit score indicates high creditworthiness and a strong commitment towards timely repayment of loan EMIs and credit card bills. A low credit score, on the other hand, indicates an irresponsible attitude towards credit. If you want to be approved for a home loan, make sure your credit score is at least 750.

Check Home Loan Eligibility

All lenders have very strict eligibility requirements. Only those borrowers who meet these eligibility requirements get approved for a housing loan. These eligibility requirements vary around age, income, job profile, credit score, etc. So, before you apply for a home loan, go to your lender's website and make sure you meet all eligibility requirements. If your home loan eligibility is going down due to you not meeting one or two eligibility requirements, talk to your lender and explain to them your side. This might convince them to approve you for a home loan.

Use a Home Loan Calculator

Before beginning your home loan application, make sure to use a housing loan EMI calculator. A home loan calculator is an online tool that allows borrowers to understand their EMI obligation with respect to the home loan amount they wish to borrow. The calculator is free to use, easily available and requires borrowers to enter only three pieces of information-- loan tenor, loan amount and the home loan rate of interest being offered. As soon as a user enters these values, the home loan calculator gives the user their tentative EMIs. Using the calculator is important as it allows a borrower to understand whether they can afford to repay the loan they wish to take. Applying for a loan amount that one can repay makes the process of loan repayment easier.

The Don'ts of Home Loans

Applying for a Home Loan Amount Higher Than What You Qualify For

When it comes to buying a home, all homeowners want to buy the best they can afford. Unfortunately, home buyers' income does not always support their desires. In their attempt to afford the home they wish to buy but cannot afford, lenders sometimes apply for a home loan amount higher than they qualify for. This inevitably leads to home loan rejection. Home loan rejections impact a borrower's credit score negatively and reduce their chances of getting approved for a loan future. Thus, before beginning a home loan application, borrowers must use a home loan eligibility calculator to figure out the loan amount they qualify for and apply for this amount only. This will ensure quick and easy home loan approval.

Not Saving Enough for Down Payment

Lenders sanction up to 80% of a home's value as a loan. The remaining amount must be paid by the home loan borrower as down payment. Lenders ask for down payment to ensure home loan borrowers have a stake in the property as this reduces chances of loan default. Some home loan borrowers think they can get lenders to sanction the entire value of a home as a loan and do not arrange for down payment. This is a mistake one should never make. Make sure you have saved ample money to clear the down payment. In fact, if possible, try and pay a higher down payment than the minimum amount required. This will lower you EMIs and make loan repayment easy.

Do Not Go for a Short Loan Tenor if You Cannot Afford the EMIs

Home loan borrowers are often told to keep the loan tenor short as this helps them become debt-free as quickly as possible. However, a short loan tenor often translates into high loan EMIs, which makes it difficult for people to repay the loan. If keeping your loan tenor short is making it difficult for you to afford your home loan EMIs, go for a long tenor. It is more important to repay loan EMIs on time and without defaulting than becoming debt-free quickly.

Final Words

Keeping these dos and don'ts in mind will help you get approved for a home loan quickly and repay your loan in a stress-free manner. Eligible applicants can avail of attractive offers on home loans, starting as low as 8.60%* and for a loan tenor extending up to 30 years, which further completely eases the burden of loan repayment.

*Terms and conditions apply.