8 Home Loan Tips
Choosing your dream home with carefully thought out features and amenities is relatively easier when compared to choosing the right home loan. Follow these tips to get ready for the long way home!
1. Learn the basics of taking a home loan
Approval of home loan is a long drawn process and you have to do your homework inadvance. Find out as much about the process as possible, (i.e.) the time taken by banks to approve the documents needed by the bank, details regarding inspection of the property, checking of legal documents, the actual loan disbursal, etc.
2. Get your credit score
Before approaching any bank for a home loan, you should request for your credit report online, from the credit bureau. A good credit score is essential to get a loan approval. The higher the credit score, the better. Anything above 700 is good, but if your score is below 550, it would become difficult to get approvals.
3. Learn how much loan you are eligible for
You can check your loan eligibility online using home loan eligibility calculator from citibank. You can avoid last minute surprises, by knowing whether you are eligible for the loan amount you are expecting. Ideally, you will be eligible for a loan whose monthly EMIs are within 50% of your monthly income. You can also check your EMI using home loan EMI calculator from Citibank. Banks also consider this while approving home loan applications. Knowing this in advance will ensure a smooth home buy.
4. Make arrangements for down payment
If you don’t plan well for the down payment you may end up exhausting all your savings. Banks provide loans for a maximum of 80-85% of the property value. This means, if you are buying an apartment worth Rs. 1 crore, the maximum loan you may get is Rs. 85 lakhs. You have to raise the balance Rs. 15 lakhs from your personal savings.
5. Choose the bank which has your salary account
Do a comparative study of the interest rates offered by various banks and choose the best for you. However, if the differences of rates are negligible, choose the bank where you have your salary account. This will help you get a quicker loan approval, than from a bank which is not known to you.
6. Floating or fixed rate of interest
Choosing a fixed or floating rate completely depends upon your situation and the market trends deciding the rates. If the rates are quite low, going for a fixed rate will make sense as the rate will continue for the entire tenure of the loan. However, if market trends reveal that the rates are high, going for a floating rate will help you take advantage when there is a correction in the market.
7. Choose projects that are approved
Banks usually approve a project only after doing a thorough security check of all the property related documents and authority approvals. Choosing projects that are approved by banks assures you that the property is free from encumbrances and makes it easy to get loan approvals.
8. Claim your tax benefits
Home loans are a major source of tax savings. You should also remember to claim the due benefits when you file your tax returns.
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