When applying for a home loan, avoiding typical errors that could potentially harm your loan application is crucial. These errors may include possessing a bad credit score, lacking a steady income, failing to explore the best interest rates, and requesting excessive credit. By being mindful of these pitfalls and taking necessary measures to avoid them, you can increase your chances of receiving approval for a home loan under advantageous conditions. Also, you should run a free CIBIL score check and calculate home loan EMI. This article discusses the common mistakes to avoid when applying for a home loan.
Importance of Checking Your Credit Score Before Applying For A Home Loan
- When evaluating the creditworthiness of those applying for home loans, lenders consider their credit score. Therefore, it is better if borrowers undergo a free CIBIL score check and calculate home loan EMI before applying.
- Approval for a home loan is more likely with a credit score of 750 or higher. Those with higher credit scores may be eligible for home loans with lower interest rates.
- Regularly checking credit reports can help individuals identify areas for improvement in their credit scores.
- If credit scores increase, it can increase the likelihood of home loan approval and potentially lead to lower interest rates.
- Failing to monitor credit scores can result in rejection for a home loan or higher interest rates.
Common Mistakes To Avoid When Applying For A Home Loan
Here are some common mistakes as a borrower you must avoid when applying for a home loan:
- Do not Follow the Minimum Down Payment Requirement Under Home Loans
- Home loans cover 75-90% of the property’s worth, and the borrower should pay the remaining percentage as a down payment.
- Ensure you have sufficient funds for the down payment before seeking a loan.
- Refrain from using your emergency savings for the down payment. Providing a larger down payment can decrease your loan amount and lead to a more favorable loan agreement.
- Consult your bank regarding their down payment prerequisites before submitting a loan application.
- Sidestep Comparing Other Significant Factors From Several Lenders
- When determining interest rates, tenure, processing fees, loan amount, and loan-to-value (LTV) ratio, lenders consider multiple factors related to home loan applicants.
- The interest rates, processing fees, LTV ratio, and other features of home loans can differ significantly depending on the internal policies of various lenders.
- Before submitting a home loan application, applicants should compare the features provided by several lenders. It’s best to begin by contacting banks and NBFCs with which the applicant already has an established relationship.
- The borrower should run a free CIBIL score check and calculate home loan EMI before applying for a loan.
- Do Not Pay Attention to EMI Payment Capacity
- Determining the EMI amount while availing of a home loan is of utmost importance.
- Depending on future income hikes may not be a wise approach to finalize your EMI.
- The EMI should be at most 40% of your overall income.
- You should calculate home loan EMI and run a free CIBIL score check before you apply for a loan.
- Avoid Timing The Housing Market
- Timing the real estate market when purchasing a property is not advisable, much like timing the stock market when investing.
- Waiting for interest rates to decrease could result in losing the opportunity to acquire the perfect property.
- Buying a home because the interest rates are low, without proper preparation, may not be wise. The determination to purchase a home should not be solely based on current interest rates.
In conclusion, borrowers should be cautious when obtaining a home loan. To understand your financial standing, you should thoroughly know about home loans and run a free CIBIL score check. Also, you should calculate home loan EMI to plan your financial journey. By avoiding the mistakes mentioned in this article, you can repay your home loan timely and maintain a good credit score.