Important factors to consider when taking a home loan

February 14, 2018 | Author: | Posted in Financial Advisor

Some of you might decide on taking a home loan for buying your dream apartments or luxury villas or individual houses. Be it anything, we cannot ignore these factors while taking a home loan.

The master key to buying anything with such accessibility in our life is a loan. Here, however, homes are not an exception at all. For most of us, loans have become a huge part of our lives. So think twice or thrice before applying for a home loan to buy a home. Moreover, you must keep the following factors in mind even if you earn an awesome figure every month to get a loan and also, service it.

How old is the property?

The age of the property you wish to buy with a loan is a more important factor to consider. Most importantly, the banks consider the property seriously since it acts as a collateral for your loan. Sometimes, banks do not offer home loans for some areas. If you wish to buy a house in that region, then availing a home loan becomes tough. Also, some sources say that you might not be offered a loan if the property is too old.

For example, if the property you decided to buy is strong enough to last only for 15 years, banks do not consider offering a loan. Remember, banks always prefer new properties more than the old ones. This differs from banks to banks. These norms are not same for all the banks. Each bank has different norms in case of the old or resale properties. Mr Raghu got a home loan faster as he preferred to buy a luxury villa in OMR and the property was newly constructed.

What is the estimation of the property?

The estimation of any property is a significant element of a home loan process. The value of the property is taken into account by the banks. The banks give importance to the report submitted by the bank agencies. The banks stick to the value reported by the agency even though if you pay price for the house.

When it comes to resale property, never go with the prices quoted in the market. Since the implementation of demonetization, the prices have become a chaos in the real estate market. Always, consider the estimation amount of the house or villa given by the bank agencies before agreeing to buy the property.

Have you got money for contribution?

The loan to value ratio is applied by the bank while discussing the home loan amount. This is done after the valuation/estimation of the property is arrived. For example, a property worth of Rs. 80 Lakhs, the banks typically lend you up to 80% of the actual price. In less, 75% of the price is given to you. For the remaining 20% or 25%, you ought to pay in your contribution. Mrs Shanti contributed 25% of the property price and the rest was a home loan. She pays EMI for every month without fail.

Additionally, the loan amount becomes less if the bank applies loan to value ratio. You must be prepared for such situations. For example, I looked for a flat for sale in OMR of worth Rs.50 Lakhs. I expected the bank to lend me 80% of the flat’s price, which is Rs. 40 Lakhs. In case the bank’s agency estimates the property price as Rs. 40 Lakhs, which is literally 20% below the price asked. It resulted in a situation where the bank was not willing to lend me beyond Rs. 32 Lakhs even my income is enough to support a higher loan amount.

In this scenario, my savings helped me while I got only Rs.32 lakhs in hand. In case if you are put into this kind of situation, you either have to give up the token amount or you ought to contribute your money.

Do you have any credit card dues?

Never ignore your credit card dues as this may result in worst circumstances. The bankers look at the credit card dues carefully deciding on whether to lend you a home loan or not. Use your credit card wisely. Spend only a certain amount of money which you can repay before due dates. Never miss the credit card payments if you are applying for a home loan soon. As the payments due affect your CIBIL score which is a huge part of making any banker say yes for a home loan.

Try to pay all the payments due before six months of applying for a home loan. Also, to prove that you are financially fit and capable of taking a home loan, it is important to not exceed 25% of your monthly income when all your EMIs are put together.

Is your credit score good?

The biggest hurdle any customer has in the loan process is the credit score. You should have a credit score of more than 750 or above out 900. Having a good credit score (CIBIL) makes your home loan process a smooth road. In case you are going to buy an apartment or villa or any property, check your credit score once a year.

With high property prices, taking a home loan is unavoidable. The main trouble is they become a lot more troublesome if you are in order financially. Check out for these and take a good step ahead.

 

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About Author
Varsha Reddy writes for Alliance Group. They offer the best meticulously crafted Villas in OMR which is developed in a gated community. The community stands with pride as it is one unique community in OMR which has put an effort into community farming to enhance natural vegetation.

Author:

Varsha Reddy writes for Alliance Group where she helps people in Home buying, home decorations, Home Loan, Home Improvements, Renovations and others.

This author has published 7 articles so far.

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