Six home loan hiccups you must know about!
Getting a home loan to fund property purchase appears to be
an easy act. However, it requires some planning and perfect execution
An enthusiastic, 32 year old working professional walks into
the bank. He is with a building brochure in tow. It says, ready for sale flats,
all amenities at your disposal. The officer sanctions the home loan and seals
the deal with a handshake in the first meeting itself. Kids are jumping with
joy, wife is smiling happily and the proud owner is hosting the house warming
party. The journey from getting a home loan to the possession of the dream
house was a cake walk. Happens only in TV commercials though.
The scene in real life is a bit different. The home loan application, approval and sanction is a long process. At every stage there is a chance of getting rejected. Home loan rejections can be hard to handle. It’s like a direct blow to one’s dreams. A lot of effort, time and energy is at stake. Taking care of factors which are under our control can avoid the disappointing rejection situation. Here are six things you must be aware of while applying for that home loan.
#1 Check eligibility!
A number of factors determine the home loan amount you are eligible for. It includes your capacity to repay, the picture your CIBIL report paints and employment status. Finding out the eligibility criteria and the amounts beforehand will save on your effort and avoid disappointments. Either you can look out for properties which fall well within the eligibility amount, or steps can be taken to enhance your eligibility. It includes showing additional income, waiting to apply after that increment in salary or getting a co borrower to apply with you. It’s good to be cautious and aware while you still have time to fix it and move ahead.
#2 Choose one- fixed or floating?
Borrowers can choose between a fixed rate of interest or a floating rate of interest when it comes to home loans. Fixed rate of interest can help you to plan your finances better since the EMI amount will be known. And a floating rate of interest can turn out beneficial in the long run if the interest rates drop. Two things must be considered before making that decision. The first being, read the fine print carefully with reference to interest rates. If there is a change in the interest rate, after a certain period, which you are not aware of beforehand, then it is going to affect your financial planning directly. Secondly, discuss the historic trend of interest rates with the lender. Study the trends with the help of data, speak to experts if required. That will help you in making a wise decision.
#3 The money that you never saw again.
Home loan processing fees amount to 0.5% - 1% of the loan amount or a flat fee amount is charged, depending on the lender’s policies. But what we must bear in mind is that, this amount is generally not refundable. In case, the lender states otherwise, ensure the same is in writing as well. Processing fee works up to a substantial amount and letting it go when the deal doesn’t go through would not help the situation.
#4 It ended before it started.
Lenders usually have an initial screening process and conduct a series of investigations to determine if they want to continue with the applicant. This includes borrower profiling, age, income, employment details, verification of other such basic details, etc. To avoid a rejection at this level it is important to approach only those lender’s whose borrower eligibility policies match with your profile. Ensure you share correct information which can be easily verified by the lender. If this is taken care of, initial screening shouldn’t be a problem.
#5 A trunk full of cash!
Depending on the lender, a certain percentage of the total amount has to be paid by the borrower. This is called as the down payment. Down payment is a large slice of the pie. Arranging for this amount may need some time and prior preparation. Check on how much down payment needs to be done and plan accordingly. If that is not working out as per your budget, check with the lender for acceptable alternatives instead of cash. It’s good to know about the down payment amount beforehand so that you have time to make it work.
#6 Documents and all that jazz!
Lenders are very particular about property documents and other paper work. The details, formats, everything is checked thoroughly. Any discrepancies therein are not acceptable. This step is generally after you have sailed through most of the process. Things not moving ahead here on can be very upsetting. This can be easily avoided by checking with the lenders on their documentation requirements early during the home loan process. If something is not in order, you will have time to fix it. Also, sharing details with the lenders early, can give them an opportunity to recommend alternatives to you. Paperwork need not be painful. Preparation is the key.
And like always, knowledge is power. Find out what your lender is looking for, read about it and ask questions. Minor hiccups can be easily managed by being aware and prepared. Good luck for your dream home.
The scene in real life is a bit different. The home loan application, approval and sanction is a long process. At every stage there is a chance of getting rejected. Home loan rejections can be hard to handle. It’s like a direct blow to one’s dreams. A lot of effort, time and energy is at stake. Taking care of factors which are under our control can avoid the disappointing rejection situation. Here are six things you must be aware of while applying for that home loan.
#1 Check eligibility!
A number of factors determine the home loan amount you are eligible for. It includes your capacity to repay, the picture your CIBIL report paints and employment status. Finding out the eligibility criteria and the amounts beforehand will save on your effort and avoid disappointments. Either you can look out for properties which fall well within the eligibility amount, or steps can be taken to enhance your eligibility. It includes showing additional income, waiting to apply after that increment in salary or getting a co borrower to apply with you. It’s good to be cautious and aware while you still have time to fix it and move ahead.
#2 Choose one- fixed or floating?
Borrowers can choose between a fixed rate of interest or a floating rate of interest when it comes to home loans. Fixed rate of interest can help you to plan your finances better since the EMI amount will be known. And a floating rate of interest can turn out beneficial in the long run if the interest rates drop. Two things must be considered before making that decision. The first being, read the fine print carefully with reference to interest rates. If there is a change in the interest rate, after a certain period, which you are not aware of beforehand, then it is going to affect your financial planning directly. Secondly, discuss the historic trend of interest rates with the lender. Study the trends with the help of data, speak to experts if required. That will help you in making a wise decision.
#3 The money that you never saw again.
Home loan processing fees amount to 0.5% - 1% of the loan amount or a flat fee amount is charged, depending on the lender’s policies. But what we must bear in mind is that, this amount is generally not refundable. In case, the lender states otherwise, ensure the same is in writing as well. Processing fee works up to a substantial amount and letting it go when the deal doesn’t go through would not help the situation.
#4 It ended before it started.
Lenders usually have an initial screening process and conduct a series of investigations to determine if they want to continue with the applicant. This includes borrower profiling, age, income, employment details, verification of other such basic details, etc. To avoid a rejection at this level it is important to approach only those lender’s whose borrower eligibility policies match with your profile. Ensure you share correct information which can be easily verified by the lender. If this is taken care of, initial screening shouldn’t be a problem.
#5 A trunk full of cash!
Depending on the lender, a certain percentage of the total amount has to be paid by the borrower. This is called as the down payment. Down payment is a large slice of the pie. Arranging for this amount may need some time and prior preparation. Check on how much down payment needs to be done and plan accordingly. If that is not working out as per your budget, check with the lender for acceptable alternatives instead of cash. It’s good to know about the down payment amount beforehand so that you have time to make it work.
#6 Documents and all that jazz!
Lenders are very particular about property documents and other paper work. The details, formats, everything is checked thoroughly. Any discrepancies therein are not acceptable. This step is generally after you have sailed through most of the process. Things not moving ahead here on can be very upsetting. This can be easily avoided by checking with the lenders on their documentation requirements early during the home loan process. If something is not in order, you will have time to fix it. Also, sharing details with the lenders early, can give them an opportunity to recommend alternatives to you. Paperwork need not be painful. Preparation is the key.
And like always, knowledge is power. Find out what your lender is looking for, read about it and ask questions. Minor hiccups can be easily managed by being aware and prepared. Good luck for your dream home.
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