Utmost Important Requirements for taking Home Loan
In this idyllic world, everybody have enough money for all his needs but in certainty, many of us have little option but to plagiarize to meet our goals, both real and imagined and due to technological advancement these options have galvanizedand have changed several things for the lending industry.
Six golden rules to follow while taking a loan:
• The first and the foremost thing that the lender will assist you to fill out the loan application.
• After reviewing your complete loan applicationget preapproval letter from the lender. The preapproval letter is the written letter that confirms the home price which you have to own.
•Then the process of your financial documentation for loan starts and after that the approval receiving begins where the lender will check your application and check your financial information to confirm his lending decision.
• Then pre closing phase come where your home mortgage consultant will help you in securing you from the other parties claiming the Property Ownership.
• With this phase, closing date come, when all the final documents and the payments are complete for the house purchase which can be also called as settlement date.
•Then lastly, the Loan servicing steps at the time of closure which includes the billing, payments collection and the contract changes.
These were some of the rudimentary and foremost important rules to be followed while taking a rule.
Basic steps for Home Loan Process:
Step 1. Know Your Eligibility
Different people, Different liabilities and Different eligibilities, every person is different in their own way and same as everyone is different in loan eligibility which is somewhere crucial, and checking the eligibility is the best way to start home loan process.
With this understanding you can smartly choose the borrowing amount with the repayment understanding, because it is easy to get loan but tough to return because large part of your salary deduct in this loan repayment.
Step 2: Comparison across all Banks
For Banks customers are King and there are more than 35 banks which are challenging for sales target. Loan Easy portal gives maximum loan data and one should definitely compare all banks as a loan applicant ends up paying double the amount he has taken loan for.
Step 3: Home Loan Documents:
Now comes the most frustrating and time consuming process which is paper work or the home loan documents. Mostly delays happen because of the documentation hassles, so one should be ready with all the documents and should submit all the documents to bank on that very day to avoid the fro later process.
Step 4: Bank Processing Charges:
When you apply for Home Loan to a Bank, number of charges are imposed for dispensing the loan. These include documentation, legal and credit check charges. The charges are between 0.25% to 0.5% and Banks charge the amount regardless of loan application whether sanctioned or Not.
Step 5: Tax Benefits on Home loan
Tax benefits comes under two categories one is Interest component and the other is the Principal amount.
- Interest component:
Under Section 24, the interest amount paid up to 2 Lakhs to the bank can be claimed for absolution from Income tax or the interest paid in that financial year.
Note: You can claim this exemption only when you are in possession of your property.
- Principal Amount
Under section 80C, you can claim up to Rs.1.5 Lakhs for income tax exempt. The amount paid to the bank as repayment towards home loan also comes under the ambit of tax Exemption.
After knowing the complete procedure for Home Loan, now comes whether the lender will lend you or not? How will he decide?
The lender looks at the 5 C’s of credit:
Credit History: in this the lender will look at the stability of your current address that how long have you lived there and what has been your record of paying bills on time and in full.
Capacity: the lender will look out at your capacity that whether you can afford or not? Your other debts and expenses could sway your loan repay liability and he can also compare you on the basis of your earning.
Capital: this means your net worth which is the values of your assets subtracting your liabilities or how much you earn minus how much you owe.
Collateral: It refers to theadvantage of a debtor (for example, a home) that if in case debtor is unable to make loan payments then the lender has a right to take ownership.
Conditions: Lenders notices the borrower’s financial situation and his capacity to repayand a number of other circumstances and on this basis he may decide whether to lend or not.
What are the basic things to remember before getting Home Loans in India?
Already home buying is not easy as project prices doesn’t suits to everyone’s pocket, for majority of people it’s like a dream which comes with lot of hurdles and with that home loan process is another problem they need to get across to get their dream adobe. Getting home loan includes variety of exhausting work including documentation and other paperwork.
A home buying decision on great extent hinge on the amount of Home Loan you can aim. But before that you need to keep few important things in your mind. These points are basically for the first time home loan seekers, which they need to heed before applying for loan.
1. EMI affordability:
The foremost factor that influences home loan from a borrower’s point of view is probably the EMI, which he had to pay for the next coming 10-15 years. In this case, one gets worried that if something in future happens with his income what will he do? So, it is better to fix the EMI that it should not exceed 40-45% of your income. So, don’t bound yourself to high EMI’s.
2. Down Payment:
Before setting the EMI’s you should know how much you can pay from your pocket which should be at least 20-25% of the property value, as no bank will allot you full 100% loan.
Another important thing is also check your home loan eligibility, whether or not you can get the amount you seek in the first place. Any change in this will affect your pocket and will surely drop down your budget.
One more important thing is the fact that a lot of seller’s demand in cash which is black, but after demonetization this illegal process has stopped. So be aware.
3. Tenure of the Loan:
This is the time where you need to decide whether to pay higher EMI and low interest or lower EMI and high interest. But this high loan will be equal to longer tenure. However you will pay more interest in long run, but also you can get the loan at Affordable Scheduled Cost, where you can cut down the tenure by pre-paying the loan.
4. Interest Type:
The trickiest step is the type of interest.Home loans usually come with two types of Rate of Interest (ROI) fixed and floating. Fixed ROI means the constant interest rate for a period of 5-10 years and in some cases during the tenure of the loan. Floating ROI depends on the RBI norms and various Government policies and the fluctuating market which changes the interest rate. This can either go down or also up.
Fixed ROI will be higher than the floating ROI at that moment.
You can continually switch between fixed and floating ROI anytime throughout your tenure, but banks may charge the switching charges which you need to check; you need to be sure that whether this will smear to your home loan type or not.
5. Charges and Penalties:
There are some extra charges also like processing fees, legal verification charges in some cases, stamp duty on home loan and some of the charges may also apply like switching charges like if you want to change your EMI or transfer your loan.
There may be some charges for discharging your property documents for reduplicating purposes or any other, during the tenure of the loan.
6. Insurance for Loan:
This is the most important step you must do once you get the home loan expended, get home loan insurance. If in case any misfortune happen, at least your family will be secured in the house and the pending amount will be paid by the home loan insurance.
There are certain insurance policies that alsoprovide you welfares in the event of disability, loss of job, some critical illness etc. This cost also should be considered in the overall affordability criteria as it is cost above your EMI.
7. Tax Benefits:
You should be cognizant of all the tax insinuations as well as tax assistances you are entitled to receive while servicing your home loan. You are entitled to complete release of interest on home loan in India. Gain these benefits.
CONCLUSION: Do not rush into any home loan judgment based on any one factor. Always get evaluations from 2-3 banks and think over the above mentioned factors. Once you have make up your mind for your lender, the affordability and other things, go for the home loan efficiently and cover the complete procedure with wide-ranging check, else get an august platform like hcorealestates who can aid you fully in your process of home finding