Home loans are a long-term financial commitment and selecting the ideal loan is a critical decision that, if done correctly, can save money and unnecessary hassle for the life of the loan. Availing of a home loan can be easy if planned correctly. It is crucial for aspiring home borrowers to be careful when applying for a home loan to avoid facing rejections or unfavorable home loan terms.
Often, home loan applicants make common mistakes that can reduce home loan prospects. In this article, we highlight typical mistakes that borrowers tend to make and the best way to avoid them to improve your loan eligibility and chances of approval.
Common home loan application mistakes to watch out for
Before you apply for a home loan, make sure you’ve taken the time to research your options and weigh them. Read on to learn common mistakes home loan applicants make and how to avoid them.
Compare loan offers
Just as lenders are legally required to carefully assess your profile before granting home loan for you too have the right to compare lenders, their offers, reviews and policies before selecting the home lender of your choice. Some of the key parameters of your application should include:
- What are the lender’s eligibility criteria for a home loan?
- What interest rate is the lender currently offering and does it match market trends?
- Does the lender have a good reputation for servicing the borrower and post-disbursement services?
- Does the lender offer borrowers the option of linking their home loans to an external benchmark, such as the RBI repo rate?
These questions not only help you clarify the home loan agreement you are about to enter into, but will also help you narrow down your loan eligibility to meet the lender’s parameters.
Select the right loan
Borrowers must make careful choices so that they do not end up with unfavorable loan conditions such as high interest rates on home loans, which could make it difficult to repay loans.
It is imperative that you apply for the right home loan amount that matches your home buying needs, your budget and your ability to repay. Selecting a loan amount that you can reasonably repay without difficulty projects you as a low-risk borrower for the lender, which increases your chances of getting a quick home loan approval. Consider using a home loan EMI calculator to help you with your assessment.
Plan the loan
Before approving a home loan, lenders will want to know the purpose of the loan and how the money will be used. They will assess whether you will be able to repay the borrowed money on time. So lay out a roadmap that will guide you safely through the life of the loan, keeping in mind the expenses needed to accommodate future requirements and other commitments along the way.
Your loan documentation and documents must be in order. Even one missing or incorrect document can delay your loan approval. Therefore, check the lender’s list of documents and organize them accordingly.
When you submit the original ownership documents to the lender, keep a record of the receipts, either by email or on paper. Always opt for written communication with the lender to avoid any confusion as to the home loan processimplied fees, lead time, special offers, interest rates, etc.
A good credit rating is integral to loan eligibility. It gives you greater bargaining power and can effectively secure lower interest rates with suitable terms. Therefore, study your credit report in detail to check for discrepancies, which should be rectified with the credit reporting agency, before applying for a home loan.
The fine print
Home loan seekers can often be oblivious to reading loan offer documents, forms and the lender’s policy and terms. Above all, once the home loan has been sanctioned, it is important to go through the loan agreement issued by the lender before signing it.
Right from the reset clause around the interest rate to dealing with defaults, the agreement contains the lender’s terms and conditions regarding home loan fees, installments, rate changes, and more. , making it crucial for the borrower to be aware of every detail.
Most lenders convey loan fees up front, but some may not be clear at first glance, such as documentation fees, late payment penalties, loan term change fees, etc. When you read the loan agreement, check for these hidden charges and ask the lender for additional details or clarification.
When it comes to home loans, do not rely on rough estimates and hearsay. Do your due diligence so that there is no room for error. Use online home loan EMI calculators to get a loan overview and calculate your EMIs accurately. Once you have determined the affordability of the loan, you can also use a loan calculator to customize your home loan to your preference and convenience.
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