Everyone wants to own their own house. However, owning a home is a big responsibility, and people should have all their facts checked firsthand before departing on such a daunting monetary adventure.
For first-time loan customers, the process of borrowing money can be intimidating. Adult life is already hard with a plethora of responsibilities, and the added pressures of taking out a loan can only add to existing tensions. People usually have a lot of questions about all the legalities and the terms. A few of these have been explained below:
1. How much can I borrow?
Generally, one can borrow as much as 80-90% of the property value. The remaining amount, which is usually the down payment, must be provided by the applicant
2. What is the eligibility criteria?
Most lenders have a process for credit appraisal to check person’s home loan eligibility and to check the applicant’s financial status. It is where they check one’s credit, to determine if they’re good candidates to lend out money. The parameters considered are – the income of both the applicant and the co-applicant, the age of the applicant, job qualification, their profession, their employer, the question of security of tenure, an applicant’s tax history, additional sources of income, any previously owned assets or investments and credit score. After checking these parameters, the lender decides whether the candidate is worthy of replaying a loan or not.
3. EMIs or Pre-EMIs?
EMIs or Equated Monthly Installments are what one can pay back every month. According to regulations, EMI amounts may not exceed 30% of total income. EMI payments start after the total loan amount has been disbursed.
Pre-EMIs are when only interest payments are made. This happens in a situation when a part of the loan amount is disbursed to the builder. At this juncture, an individual only has to make interest payments. Since the pre-EMIs depend on construction completely, they also come with tax benefits and one can claim a tax deduction.
Most people do not know how to decide between pre-EMIs and EMIs. Pre-EMIs are better in the short-term. However, opting for full EMI payments saves you money long term.
4. What is a pre-approved property?
These days, builders have to get their properties pre-approved. Home loans can only be taken out for pre-approved properties. Having a pre-approved property means that the project is legally safe, and is legally bound to be completed on time. This saves people from additional pre-EMI payments. Pre-approved properties also require less documentation as the bank already has most of the valid documents from the builders. However, it is also important to remember, just because a bank has pre-approved a property, one is not bound to take loans from that particular bank itself.
5. Are there any extra charges?
The larger the loan amount, the more the weight-age of this fee. Thus, when choosing a lender, it is important to choose those with lesser extra charge rates to keep your loan amount lower.
Thus, these are some of the most common home loan queries answered. Buying a house is a huge financial investment and responsibility, and one should look into all their options before they make themselves incur debt to keep the brand new roof above their heads.