Planning To Take A Home Loan? Five Posers For You
Getting a home loan is integral to the home-owning drill for most of us. Therefore, every home buyer must assess if it's the 'right time' for going to the housing loan market, considering that buying a house is the largest financial investment he will likely make in his lifetime.
MakaanIQ lists five basic questions you must ask yourself to assess your readiness for a home loan.
How much money can I commit to monthly payments?
You must pre-check the various home loan products and schemes available in the mortgage market, before approaching the lender for a home loan. You must assess your appetite for the loan; that is, the amount you are capable of bringing in as the 'margin money' and the amount of loan you will be able to repay in terms of monthly instalments. You can make use of an equated monthly instalment (EMI) calculator, available on various websites, to gauge the amount you can shell out each month to pay off the debt.
The thumb rule is to get the best interest rate deal available in the market to save on the mortgage. You can opt for a longer loan tenure to reduce the monthly burden.
Examining and understanding a bank's fixed-obligation-to-income Ratio (FOIR) will help you evaluate the amount you must set aside for your survival, after paying the monthly commitment to home loan repayment. Everything that you plan to spend and put away each month should go into your EMI calculations.
How much have I saved and how much do I need to save?
Most lenders will require a down payment ranging between 20 per cent and 25 per cent of the asset's value. However, you must keep in mind that a higher down-payment would help you keep the loan amount down.
You must also compute the savings you will be able to make so that you can invest that money in some other option that will give you a return of at least 12 to 15 per cent. This will be greater than the typical 10.5-11.5 per cent interest rate that you will be paying for the home loan.
Is my credit score in a good shape?
Apart from a good credit history, a credit score will determine whether you qualify for a mortgage and on what terms. Your past repayment habits will give a clear picture of how you will treat your future obligations.
Hence, your credit report gives an outlook on your credit card payments, loan repayments, the places where you have stayed or worked, the number of times you have applied for loans, or defaulted or settled a mortgage, etc.
It is important that you do a self-analysis of your creditworthiness and keep the supporting documents ready, in case of discrepancies or defaults in the past.
Have I chosen the right developer?
Choosing the right developer is key to realising one's home dream. You must rate the developer on certain parameters that are beyond just the 'price'. These can be the quality, experience, efficiency, building layout, promptness, transparency in paperwork, delivery time of previous projects, etc. A developer who has been in the market for a few years with a good number of projects under his belt is more likely to have happy customers. You must do a proper research and clear all your doubts about the property finalised.
What are my costs outside the loan?
You must ask the lender about the down-payment costs and the closing costs of the loan. You should have a clear idea about the total out-of-pocket cost. You must read and confirm the clauses mentioned in the loan agreement to ascertain the fees and other hidden charges involved to avoid nasty last-minute surprises.