Keeping the repo rate unchanged encouraged aspiring homebuyers to move forward with their purchase plans. Moreover, the step is undoubtedly positive news for the real estate industry, which has been struggling with high inventory and low liquidity for a long time now.
This announcement will strengthen new homebuyers’ confidence and motivate them to go ahead with their plans. Moreover, this will positively affect the housing loan market and ensure substantial sales to improve the economic scenario.
Since financial health is of paramount importance when applying for housing loan, few other essential factors need to be considered.
Let’s take a close look at the factors before applying for such advances:
- Eligibility parameters for housing loan-
The first thing to consider is whether the applicant is eligible to avail the loan. It is quite natural financial lenders will have unique requirements, so it is better to check the eligibility criteria before applying. If an individual fails to meet the requirements, it will lead to rejection of loan application and head to unsuitable terms such as high home loan interest rate.
Following are the few factors that home loan eligibility depends on –
- CIBIL score must be 750 or above
- Age should be between 23-62 years for salaried individuals
- For self-employed individuals should be aged between 25-70 years
- Monthly income should be higher than Rs.25,000
- Healthy credit score-
Your credit score is the representation of repayment history and is crucial for financial lenders. To qualify for a housing loan, financial lenders require a CIBIL score of at least around 700, if not 750 or above. This parameter is set so that lenders can measure applicant’s repayment capabilities.
A score above 750 is considered good and helps borrowers to get the loan approved quickly and in more favourable terms. On the other hand, if a borrower does not possess a decent credit score, financial lenders must look into his/her personal finance factors thoroughly before approving an application.
- Search for the best housing loan interest rate –
To borrow cost-effective finance, it is wise to do thorough research regarding all the available financial options in the market and the lenders offering the most affordable rate. Then, you can shortlist the possible lenders and compare their offered interest rate. Furthermore, since such credits are long-term liability, borrowers can also choose an option of a balance transfer facility.
One of the advantages of a home loan balance transfer is that borrowers can significantly lower their interest burden.
- Perfect relation between down payment and LTV –
LTV or loan to value refers to the percentage of property’s price paid by the borrowers through a housing loan. A common misconception is prevalent among borrowers that a home loan can finance the entire cost of the property. Financial lenders only fund a certain percentage, which is 75-80% of the property; the remaining 20-25% is the down payment made by the borrower.
If a borrower makes a significant amount of down payment as the property’s price, it helps borrowers avail lesser principal amount, thereby reducing monthly EMIs and interest. An applicant can take the help of home loan EMI calculator to estimate the significant portion of the down payment to be made to minimise monthly liabilities.
- Associated charges with home loans –
If a borrower applies for a home loan, he/she is required to pay a few charges such as processing fees and more. Moreover, individuals who are willing to foreclose or pre-pay such advances also need to pay a certain amount as charges.
Individuals who are still in doubt about a home loan and the factors to remember before applying for such credit should also know about the pre-approved offers extended by reputed housing finance companies to make the loan application process swift and simplified. One can check their pre-approved offer also available on home loans, LAP etc.
To conclude, if borrowers find this entire loan application process stringent or fail to meet the eligibility parameters, they can choose to apply for the PMAY programme (Housing for All) initiated by the Indian government to provide affordable housing for all. However, before using this government scheme, individuals must be well aware of the factors, terms and conditions associated with it.