Getting a home loan approved depends on numerous factors. To a great extent, your eligibility depends on how well you’ve prepared before applying for the loan. This could include how well you’ve prepared to put together all the documents required for a home loan. Therefore, in order to succeed, you need to have the bestunderstanding of the eligibility criteria for a home loan, and more importantly, you must avoid committing common mistakes that first-timers tend to make.
Take a look at this list of the top five mistakes that you should avoid as a home loan applicant before you go ahead with your application form.
Not Reviewing Credit Score Before Applying for Home Loan
Your credit score plays a major role in ensuring that your application is approved. A high credit score shows that you have a history of paying all your bills and loan EMIs on time, without defaulting. This makes you a low-risk borrower for the bank, which means that they are more likely to approve your application. So, check your score several months in advance, so that you can improve the score, if needed.
Lacking Documents Required for a Home Loan
Before you go ahead and apply for a home loan, make sure you have all the necessary documents with you. For instance, you must have an age, identity, address proof on you, six months’ bank statements, a passport-sized photograph, etc.
Not Checking the Repayment Tenure
The house loan EMIs you will need to pay will depend not just on the interest rate but also on the tenure of the loan. So, make sure you check what duration of repayment would suit you the most. The best banks offer tenures as long as 30 years to make the EMIs more affordable for you. In addition, you get to tax benefits on home loans, which makes them even more affordable.
Not Planning for the Down Payment
Before you put in your application for a home loan, make sure you have the funds to pay the down payment for your dream home. Although the best banks offer up to 90% of the total purchase price, there will always be a portion that you will need to fund on your own. So, make sure you start saving or investing well in advance. Building a corpus could also help you make a bigger down payment and take on a smaller loan.
Not Going for Pre-Payment
Over time, your salary might increase or you might come into some money. You can use such additional funds to either make a big part payment on your loan and bring down the amount you owe or even pre-pay the entire amount. But make sure to check the terms for pre-payment and whether there is any penalty involved before applying for the loan.
Moreover, it’s recommended that you must carry out thorough research and have a good understanding of how home loans work so that you can make a smart decision while buying your dream home.