A home is a basic necessity for every individual. Thus, buying or building a dream house is the top of everyone’s wish list. But given the sky-high real estate prices, purchasing your dream home can be very challenging. That’s where House loans can be your go-to option.
Due to the overwhelming number of options in the market, it can be a very confusing task to choose the best home loan for your needs. This blog deals with everything related to House loans, including home loan interest rate, tenure, repayment, etc., to help you clear your doubts and make an intelligent choice.
What Are Home Loans?
A home loan is a secured loan acquired to buy a property by pledging the asset as security. However, you can not only buy a new property of land with House loans but also use it to purchase the land on which to build it or even for home renovations, additions, and repairs. Therefore, choosing the best home loan for yourself becomes crucial because of the range of applications it offers.
Eligibility Criteria For Home Loans
Banks maintain a list of requirements for House loan eligibility. A person’s credit history is the first thing a bank looks at to determine their repayment tendencies. A credit score of 750 or higher is typically preferred. The following are some other crucial considerations:
- Age Type of Employment
- Requirements for the Minimum Annual Salary Collateral Security Margin
- Assets, liabilities, Occupational Stability, and Continuity
- Status of residency (Indian Resident/Non-Resident Indian)
All these criteria weigh in when a bank offers a House loan to you. They are also vital in determining the home loan interest rate that the bank provides to you.
Types Of Home Loans
House loans can be of many kinds:
- Home Purchase Loan
- Construction House Loan
- Land Purchase Loan
- House Improvement Loan
- Home Repair Loan
- House Extension Loan
4 Things To Consider Before You Apply For A Home Loan
Choosing the best home loan is a task that should be dealt with a lot of research. There are vital things to consider before you apply for a House loan. Here are some of them:
- Check your credit score: A good credit score and credit history should be considered the first factor when you are applying for a home loan. They make it simpler to get loans at lower interest rates and with additional credit benefits.
Your credit profile is crucial and enables lenders to provide you with a lower interest rate. Lenders prefer borrowers with credit scores above 750, and you can save a lot of interest by obtaining the best home loan interest rate. Take the necessary actions to raise your credit score if it is below 750, and then approach lenders.
- Rate of interest: To choose the best House loan for yourself, you should know the two House loan interest rate types- fixed rates and floating rates. In a fixed rate loan, the interest rate does not change over the life of the loan.
In contrast, a floating interest rate means the interest rate may vary depending on the state of the market. Financial experts advise floating rates when future interest rates are anticipated to decline. Floating rates typically cost 1–2 percent less than fixed rates, allowing for long-term savings.
- Repayment terms: Ask the bank if you can choose a loan with a shorter repayment period before you choose any loan. Always select a shorter term because the longer it takes to pay off the loan, the more interest you will have to pay.
- Required documents: You should prepare the documents for your House loan. These documents include- Income Tax Returns. PAN Card, Aadhar Card, Bank Statements for the last 6-12 months, etc.
Therefore, go through the following points to make an informed decision and get the best House loan for yourself that offers the best home loan interest rate, shorter tenure, and more manageable repayment terms.