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Do’s And Dont’s While Applying For A Home Loan

If the hindrance to your achieving the goal of buying your dream house is a financial crunch, you should not be worried too much in the present scenario when home loans are readily available.  Numerous market players are providing home loans with lucrative offers. 

Having said that, certain criteria stipulated by banks have to be complied with to qualify for the loan. Besides this, there are a few dos and don’ts you will have to follow if you have to succeed in availing of a home loan.

Here is a list of dos and don’ts for your understanding.

Assess your repayment capacity

Affordability is the first thing that will help you decide if you are ready for a home loan or not. You should never overburden yourself financially. Factor your existing commitments, the backup fund required for any exigencies, and the probable EMI for the proposed loan. Arrive at the net disposable amount available for your sustenance. Using the SBI Home Loan EMI Calculator, you can get an idea of the loan amount you will be eligible for in proportion to your affordable EMI. 

If the amount is not adequate to fund your choice’s property, you will have to either go for an alternate property within the budget or increase affordability. One other solution would be to make a higher down payment. This will enable you to get the loan at a lower rate and save up overall. 

Scout for the lender

After assessing your affordability, the next thing to do is find a suitable lender who will give an economical deal and handhold you through the loan process. You have several websites with a comparative list of interest and other charges collated on a single page for your convenience. You can browse through and make a deliberate choice of the lender. The final loan application should be to a lender offering the loan at the lowest interest rates and charges with maximum tenure and the lowest margin. 

ICICI Bank Home Loan are available at affordable interest rates and nominal charges. The turnaround time for the home loan is also minimal.

SBI Home Loans are also available at affordable interest rates and various schemes designed exclusively for Government Organisation/PSB/PSUs, Defence Personnel, Persons residing in Hilly and Tribal areas, etc. The bank also has an exclusive scheme that suits youngsters who have just started their careers.

Know your credit score

Credit Score is a crucial factor that will assess your creditworthiness.  A credit score is a yardstick to gauge your financial discipline. A minimum credit score is required to qualify for the loan, If you plan to avail of SBI Home Loan, your credit score should be 750, and above and for ICICI Bank Home Loan, your score should be 700 and above.

If your credit score is below the desired level, check the report. If the report has any errors, take up the matter with the customer support of the credit bureau to resolve the issue. Once the issue is resolved, the score will improve automatically. Otherwise, you can check to see if you are eligible for a USDA financing which has flexible credit guidelines.

If it is due to delay/non-payment of EMI and credit card dues, try to clear the overdue and start paying the EMIs and credit card dues well to improve the score.

Improve your Credit Profile

If you have submitted an ECS mandate for utility bills and EMIs, you maintain sufficient balance in the account well before the due date to ensure that no  ECS returns unpaid for want of funds. This will boost your integrity and will convince the lender about your financial discipline. This is even more important if you plan to avail of a home loan with your existing banker. There are various added benefits like concession in charges, interest rates, etc., if your dealings are satisfactory. You might even be eligible for a pre-approved home loan.

Under SBI Home Loan, you can obtain an SBI Pre-approved  Home Loan wherein the loan will be sanctioned even before you have finalised the property. This will enable you to look for a property within your budget.

You can avail of a pre-approved home loan under ICICI Home loan, which is exclusively designed for ICICI Bank customers having a salary account with the bank.

Avoid  multiple loan applications with different lenders at short intervals

The first step that the lender follows the moment a loan application is received is to draw a credit report to assess your creditworthiness. This inquiry is known as a hard enquiry. Every time a hard enquiry is made, your credit score declines by a few points. Repeating the process several times will lower your credit score considerably.

Instead, make an online loan enquiry as many times as you wish. There are various websites where you get the necessary information. Even here, the moment an inquiry is made, a credit report is drawn, which is known as a soft enquiry. A soft enquiry will not impact your credit score, so it is the safest way to make loan enquiries.

Remember to keep your credit score at 750 and above for SBI Home Loan and 700 and at 700 and above for ICICI Bank  Home Loan.

Avail the loan jointly

If you want to increase your home loan eligibility, you can avail of the loan jointly with your parents or spouse. The income of the co-applicant will be taken into account to arrive at the eligible loan amount. If a woman is added as the co-applicant, some of the banks provide the loan at a concessional interest rate.  There is a concession of 0.05% on the interest rate charged to SBI Home Loan to women borrowers.

Opt for tenure as per your affordability

Opt for a short tenure to get a better rate of interest and lower the loan’s overall cost if you can afford higher EMI. If not, opt for a longer tenure to match the affordable EMI.

Follow the above tips and wade through the home loan process without any hitch.

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