Check Out These Questions Before Applying for a Home Loan

Getting a roof on the head is one of the most basic human needs. However, rising home prices have made it harder for the ordinary person to purchase one. Using emergency funds or other savings to buy a new house is not prudent as it requires a vast and long-term investment. However, it is affordable for most people to take a home loan and finance the purchase of a property. A home loan bridges the gap between potential people and their dream houses. Read on to learn more about home loans and critical considerations before applying. 

How does a home loan help?

A home loan can be explained as a type of secured loan that can be taken to finance the purchase of a new house. The house being purchased also acts as the collateral for this loan. Therefore, the lenders bear little to no risks while lending more to potential home buyers. Since the risk quotient is low, the interest rates charged on loans are also very affordable. Home loan tenures can be as long as 30 years. It allows borrowers to repay the amount in low EMIs. They can choose a suitable EMI based on their income and existing debt obligations.

Must ask questions before applying for home loans 

Home loans offer an affordable solution to buying homes for personal or commercial uses. However, the amount provided using a  loan is usually high to cover the cost of the property. Therefore, it can be harder to repay, and one must be mindful of their repayment capacity before signing the agreement. Here are some crucial questions that must be asked before applying for a home loan.

• How will you pay the down payment amount? 

The first and most important question to ask before getting a home loan is related to the down payment amount. Most house loans cover anywhere between 65 to 90 per cent of the property’s current value, based on the LTV ratio offered by the lender. The remaining balance has to be arranged by the home buyer. Let’s take an example to learn better. Suppose that the cost of the home is INR 50,00,000 and the LTV offered by the lender is 80%. You will have to arrange the 20% amount (INR 10,00,000) to meet the down payment requirements. You must have this amount ready before applying for a home loan. 

• Do you know about home loan insurance? 

Another critical question that must be asked before opting for a home loan is related to loan insurance. Most loan providers offer house loan insurance to borrowers. However, one must know about the loan insurance scheme before taking one. You need to understand what this insurance entails and how it can benefit borrowers like yourself. Having incomplete knowledge about home loan insurance will not work in your best interest. 

• Do you have an emergency fund? 

It is highly recommended to have an adequate emergency fund to meet urgent financial obligations such as medical expenses. You should only consider buying a home if you have ample savings for financial emergencies. Never use emergency savings to finance a house’s purchase or down payment. Life can throw curve balls unexpectedly, and you need resources to overcome challenging situations. Keeping an emergency fund should be on top of your priority lists. 

• How are you planning to negotiate for better terms?

Most people are unaware that they can negotiate for better terms, such as low-interest rates, processing charges, etc., on their home loans. How you plan to negotiate is an important question to ask before opting for a home loan? Maintaining a good CIBIL score will open new doors for negotiation. Lending institutions will perceive you as a low-risk borrower and offer better home loan terms. 

• How to calculate the EMIs?

The new-age digital banking solutions have made loans more accessible. EMI calculation should be the first thing on your list before applying for a house loan. Reputed home loan providers like PNB Housing Finance Ltd have home loan EMI calculator on their websites, which prospective customers can use before taking a loan. Finding the right EMI amount is crucial to repay the loan timely and maintaining a good credit score. 

Final Words

Getting a home loan isn’t as difficult as you think, especially when you know what you’re doing. In fact, it can be one of the most straightforward, easiest financial decisions you make in your life, as long as your numbers are realistic and you don’t get carried away by unnecessary frills. This article will definitely help you out if you’d like to learn more.