It requires a lot of analysis and planning before committing to buying a property and then to a home loan lender. Buying a home is an expensive and long-term commitment, and hence, doing so without due diligence or proper research could land you in trouble.
Check out some of the most common mistakes that homebuyers need to avoid at all costs while applying for a home loan:
1. Not Checking Your Creditworthiness
A healthy credit score is one of the most significant requirements of a home loan. Ideally, the applicant must have a credit score above 700 as this will facilitate a lesser and more comparative home loan interest rate from the banks. The higher the applicant’s credit score, the more are the chances of securing a lower interest rate.
Remember to assess your credit health and take a credit bureau’s help to calculate your credit score. Nowadays, it is possible to calculate this score yourself through any banking website or third-party aggregators as well.
2. Not Calculating Down Payment Correctly
If you are planning to buy a home that is still under construction, then remember to do the down payment calculation correctly. Many people assume that they can pay down payment proportionately for a property under construction while their bank disburses the rest. However, lenders will always insist on you bringing the total amount at once and only then make the final disbursement on the home loan.
3. Not Comparing Loan Quotations from Multiple Lenders
Many components make up a house loan, like processing charges, home loan interest rate, loan amount, repayment tenure, amortization table, etc. It is very vital to know about all of these components from different banks and lending institutions. Before you finalize a bank and put it in the loan application, never forget to compare loan quotations from multiple lenders and opt for the one that would give you maximum benefit.
4. Not Calculating EMI Payments in Advance
When you sit to calculate your home loan repayment tenure, it is crucial to know precisely how much EMI you will be paying on a monthly basis. This will help you keep a few EMIs ready in advance and stored in your bank account as an emergency or for a rainy-day payment. Not calculating your repayment schedule before applying for a loan could land you in financial trouble later, in more ways than one!
5. Not Choosing to Insure your Home Loan
It is very important to take proper insurance cover for the property one buys as it protects the buyer and their entire family from financial distress. Home loan insurance can help you clear dues and stay financially covered in case of any unforeseen event or circumstance. There are many insurance products that will cover home loans, like a life cover, for example, where the sum includes your liabilities.
Read Also: A Complete to Guide for Renovation Loans
Buying a home is a crucial decision in every home buyer’s life as this is one of the longest financial commitments one will ever make! Steer clear of these common mistakes while applying for a home loan.