Applying for a home loan is a big financial decision and you must plan it very well. If you are a first-time home loan applicant, here a few vital questions you must ask yourself.
Buying a new home is one of the most fulfilling experiences. But, it also requires careful financial planning. And, getting a home loan is easily one of the biggest financial decisions you may take in your life. Today, with banks, NBFCs and other financial organisations willing to lend, availing a home loan has become easier than ever before. But, before you start filling out the application form, here are a few important questions you must ask yourself.
Do I have the right credit score to secure the home loan?
A credit score is a three-digit number that reflects your creditworthiness based on your past repayment habits. It is one of the important eligibility factors that the lenders consider while determining the maximum amount they can lend.
Most lenders have a benchmark credit score requirement and consider a score of 700-750 or more as an ideal score for availing a home loan. So, before you apply for a home loan, it is vital that you check your credit score and check if you meet the lender-specific requirement.
If you have a high credit score, the lender will consider a responsible and low-risk borrower and will not hesitate to approve your home loan application. On the contrary, if your credit score is less or does not meet the lender’s requirement, there is a risk that the lender will reject your application or charge a high interest on the loan.
Do I have enough funds to pay the down payment and other related-expenses?
As per the RBI (Reserve Bank of India) home loan guidelines, the lending organisation can provide a maximum of 80% of the property’s value as loan. You must pay the remaining 20% from your pocket. This is known as down payment and an integral part of the home loan application process.
Apart from the down payment, you must also bear with expenses like property registration fees, stamp duty, loan process fee, etc. all of which can contribute a significant amount. So, before you start looking for the right lender, you must review your finances and determine if you have sufficient investments and savings to handle these expenses.
Make sure that you arrange the funds for down payment before you send the application process, as without the pay, your application will not be processed further and there will be an unnecessary delay in the approval process.
Can I include my spouse as a co-borrower?
Today, many home loan borrowers, especially first-time borrowers are applying for a joint home loan. And, they are including their spouse as a co-borrower and co-owner of the property mainly to avail the benefit of PMAY (Pradhan Mantri Awas Yojana) Scheme and get a subsidy on the home loan interest rate.
Additionally, when you include your spouse as a co-borrower, the lender considers their income too and you can be eligible for a higher loan amount. Not to mention, if your spouse files tax returns, both of you get tax benefits.
Thus, before making any decision to avail a home loan, make sure that you assess your financial condition and ask yourself the above questions. This will help you make an informed borrowing decision.