Before taking on the responsibility of a home loan, it is essential to ensure that you are well-prepared. Home loans are large-ticket loans that include a long-term financial commitment in the form of increased tenures that can last up to 30 years. That’s why home loans are a huge financial commitment in each and everyone’s life. That’s why it’s important to follow 5 checkpoints regardless of whether you are able to avail a Best Home Loan sooner or later:
Down payment accumulation
It is important to keep in mind when you are outlining the steps necessary to obtain a home loan that if you do not save up a sufficient amount of money for a down payment, your application may be denied. Home loans can currently cover anything from 75% to 90% of the value of the property, provided that the Home Finance Company in India complies with the standards set forth by the RBI.
Because of the upper limit placed on these LTV ratios, Best Home Loan borrowers are expected to make a down payment that represents a minimum of 10 to 25 percent of the total cost of the property that they are purchasing. However, rather than simply accumulating the bare minimum of 10-25 percent for a down payment, attempt contributing a bigger proportion of the total from your own pocket, if at all possible.
Doing so would result in two positive outcomes. To begin, if you make a larger down payment and other contributions, the amount of money you will have to borrow and pay back in the form of a home loan’s principal and interest will be lower. Second, making a larger down payment would result in a lower LTV ratio, which would increase your chances of being eligible for a Best Home Loan and of having that loan approved.
Despite this, you should take care not to put an undue strain on your finances or jeopardise the achievement of any of your other important financial goals in the process of trying to build up a larger down payment towards taking a loan from Home Finance Company in India.
Examining Your Credit Score
In addition to being one of the most essential criteria used to evaluate a person’s creditworthiness, the significance and importance of a person’s credit score are growing as a result of the growing trend among Home Finance companies in India to base interest rates on loans for homes on the borrower’s credit score. This trend is evidence of the credit score’s growing significance and importance. If you have a credit score of 750 or higher, you are regarded to have good credit.
This not only increases your chances of getting approved for a loan from Home Finance Company in India, but it also makes it possible to negotiate a reduced interest rate and more favourable repayment terms. When this is taken into consideration, it is very necessary to obtain a copy of your credit report at regular intervals, particularly if you are considering applying for a Best Home Loan. If your credit score is on the lower end, you should take steps to gradually improve it, and you shouldn’t apply for a home loan until your score is at least 750 or higher. If your credit score is on the lower end, you should take steps to gradually improve it.
To obtain a copy of your credit report, you have the option of requesting a free report along with free monthly updates from an online financial marketplace. Alternatively, you can request a free report from each of the four credit bureaus once a year and receive a free copy of your credit report from each of them. These types of marketplaces also have the ability to deliver pre-approved home loan offers based on your credit score as well as other personal facts and eligibility criteria.
Make sure that you can afford your EMIs.
The ratio of a borrower’s EMI to income is another important aspect that determines the Best Home Loan eligibility. It is the percentage of your income that is being utilised at the moment to make payments toward your debts, such as your credit card bills and loan EMIs. The lower the ratio, the better your chances of having your mortgage application accepted.
Whereas on the other hand, having an already high EMI to income ratio indicates that a significant portion of the income you already have is already being set aside for the purpose of repaying debt. This increases the likelihood that you will default in some form or another on the repayment of the loan, particularly whenever an additional expense or financial emergency arises.
Considering that most providers of home loans have a preference for lending to borrowers whose EMI to income proportion is between 50 and 60 percent (including the EMI on the new loan), individuals who have an EMI to income ratio that is higher than 50-60 percent may be perceived as a ‘risky’ prospect for the home loan, which increases the likelihood that the loan will be rejected.
Make sure you have enough contingency funds.
It is essential to have a sufficient emergency fund in place. This fund should be equal to at least six times your essential and recurrent outgoings, such as loan EMIs, insurance premiums, rent, and other similar obligations. This would assist you tide over unforeseen exigencies that temporarily restrict your regular cash intakes, such as a sudden loss of employment or a serious illness.
This would be helpful in tiding over these kinds of situations. In addition, because mortgages are typically the largest financial commitments that most borrowers take on, having enough emergency funds can ensure that you do not end up defaulting on your loan in the event that a financial catastrophe arises.
On the other hand, if you do not have an emergency fund or if it is insufficient, you may be forced to liquidate your long-term investments or seek out other types of expensive loans in order to meet the immediate monetary requirement.