6 Mistakes To Avoid When Taking Home Loan

Buying a house is a very emotional and once-in-a-lifetime decision for most people in our country. Many memories are associated with a home; people spend the whole of their life savings on buying a house. So emotionally and financially, it is a lifetime commitment; hence it becomes imperative to evaluate this decision because if something goes wrong, it will have a lifetime impact on our lives.

We have listed six crucial points to consider before taking a home loan to buy your dream house!

1. Choosing the Builder

Going with a trustworthy builder is the first and most critical step. In today’s era, where big builders going bankrupt has become standard, it is vital to evaluate the builder before you finalize your house. Please consult your friends or relatives who have bought the house with the same builder. Always check the builder’s past record in terms of timely delivery of the projects. If it is a running society, you can also pay a visit to some of the residents of the society where you are finalizing your house. Many people have lost their life savings by failing to choose the right builder.

2. Choosing a Bank for Home Loan

Nowadays, the moment you have finalized the house, the next step is applying for a home loan with Banks or NBFCs. It is crucial to choose the right bank as this step will decide the actual cash flow out of your pockets. The rate of interest varies from bank to bank. There are various sites where you can compare the rate of interest offered by different banks, like bankbazaar.com, paisabazaar.com, etc. Further, many banks will have hidden charges, so always ensure that you have clarified and understood all the terms and conditions of the bank, if required discuss your queries with the bank executives at length, and don’t feel shy about asking questions from the bank as you are the one who has to take care of your finances, once you are fully satisfied with everything, then only proceed with the loan from the bank of your choice.

3. Credit Score of Loan Applicant

Before the banks approve a home loan, they check the Credit score of their Loan applicant, i.e., YOU! The applicant’s credit history has become the main factor for the banks to decide whether to give the loan. Apart from this, credit score also determines the rate of interest at which the loan will be given. The higher your credit score is, the better (lower) your interest rate will be. So, it is essential to maintain a good credit score. There are various sites from where the credit score can be checked, like policybazaar.com, cibil.com, Bankbazar.com. etc. A credit score above 750 is generally considered good. So ensure that you follow all the best practices like paying your credit card bills on time, having a few loan accounts, not using your credit card limit entirely, etc.

4. Minimum Down payment

Many people are unaware that home loan is available for a certain percentage, like 75%-90% of the total cost of the house. It means that the balance amount needs to be paid upfront by the applicant. So, you should have the required amount of money to be paid to the builder. As a sound financial practice, always ensure that the down payment you make should not be from your emergency fund.

5. Overshooting Expenses

Calculate your finances! Make sure that after paying your EMIs, you can balance your monthly expenses without trouble. Many times, people don’t calculate their finances when taking a home loan and keep the EMIs so high that later it becomes a struggle to take care of even the monthly expenses, or sometimes people start a financial commitment after taking the loan and forget to take into account the EMI expense. So please always maintain a comfortable financial position, so there is no strain on your mind after taking the loan.

6. Government Policies

Many government schemes are available for first-time home buyers or if the owner is a female. Some banks offer a lower rate of interest if the owner is female. Please check the availability of such schemes on government websites or bank’s website. One such scheme is The Pradhan Mantri Awas Yojana( PMAY). It aims to assist first-time home buyers and encourage women to become homeowners by providing an interest subsidy on home loans.

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