Let’s face it; buying a house is a big personal achievement for the majority of Indians. However, as exciting as it is, a property purchase comes with an array of financial considerations, even if you’re opting for a home loan.
While there are many lenders offering loan deals, getting the most favourable offer depends on your research. So, here are some tips you can keep in mind to get the best possible financing deal.
Maintain an adequate credit score
A good credit score, preferably above 750, is a must-have to get an attractive home loan deal. Why? Because it’s the first thing that most lenders check. The score determines your creditworthiness, or in simpler words, your ability as a borrower to repay the loan.
With a high credit score, you will be eligible for loans from various lenders and have more options to pick and choose as you will. Besides, you will qualify for bigger loan amounts loans due to your high credibility.
But that’s not it! A good credit score can also get you reduced home loan interest rates. Therefore, maintaining a healthy credit rating before approaching a lender is crucial. The best place to start is by regularly checking your credit score. To improve your score, you can keep your credit usage to a minimum, pay off existing EMI dues punctually, and decrease other debts.
Down payment and EMI
Along with the credit score, lenders also check your debt-to-income (DTI) ratio during the application process. If it’s high, it means a large chunk of your income is being spent on repaying debts, leaving you a small amount for your other expenses. A high DTI can reduce your loan approval chances, as you are deemed more likely to default on your loans.
The best way to reduce your DTI is to opt for a longer tenure. With a longer-term, your home loan EMI size will significantly reduce, lowering your DTI in the process. However, a longer tenure means you’ll spend more on interests.
Another way to bring down your EMIs is by making a sizeable down payment. However, a higher down payment amount must not come at the cost of your emergency savings. So, you also use a home loan EMI calculator to compute the EMIs and interest amount beforehand to sort your finances.
Conduct a comprehensive lender research
Before choosing a lender, visit different lenders’ websites and compare their offerings. Consider factors like repayment flexibility, tenure options, home loan eligibility criteria, and interest rates.
It is also essential to know about the extra costs lenders levy before agreeing on a deal. These additional charges can include processing fee, legal dues, loan transfer fee, administrative fee, late payment fee, part prepayment fee, etc.
In summary
While living in the desired home is a dream shared by many, lack of know-how is the primary reason why borrowers end up miscalculating their finances. However, carefully considering all the factors mentioned above should help you land a loan offer best suited for your financial goals.