When applying for a Home Loan
Virtually every young family in India aspires to own a home. A Home Loan is a great way to part finance the dream home that you always wanted to own. Here are the top 6 factors to keep in mind before applying for a home loan:
1) Get your own credit report
Apply online at http://www.cibil.com/accesscredit.htm and follow the instruction given there to get a copy of your own credit report. Check your credit report thoroughly to spot errors. If need be, use our advisory services on CIBIL Report to get any errors corrected. Remember any errors in your credit report can reduce your chances of getting a good home loan offer. This report is likely to be accessed by the bank's credit department after you apply for the home loan for inputs on you credit history.
2) Finalise property first before you finalise and apply to your lender.
Lenders reserve their best rates for immediate disbursement customers and hence customers who have finalised property get the best possible home loan offers. Also if they have any issues with your property it will get highlighted before you incur too much effort and costs. Some lenders may not be comfortable with you buying a plot and self constructing on it. Some lenders will not fund under construction property unless the developer is pre-approved with them. A lot of lenders can have issues if the property you are buying is more than 15-20 years old.
3) Be prepared to lose out on the processing fee.
Most companies charge a non refundable processing fee with the home loan application which will not be refunded even if you decide not to use the loan sanction. The lenders incur costs for sanctioning your loan and hence in most cases this is non refundable. If anybody is promising you that the processing fee cheque will not be put in without your prior approval or that the processing fee will be refunded if you do not accept the sanction the chances are that he is lying.
4) Fixed rates are rarely fixed:
Understand the interest rates chargeable to you. The fixed costs quoted are normally fixed only for a period of 12 to 60 months and can be revised thereafter. Understand the rates chargeable to you by seeing our detailed home loan comparison table and then decide.
5) Make a provision for higher down payment :
Lenders carry out an independent valuation of the property being bought and they will fund around 80-85% of the valuation amount as determined by their valuers. These independent valuers normally are conservative and value the property (especially property bought on resale) much lower than what you might actually be paying for it. While you can ask for a second valuation (at your cost off course) you should be prepared to shell out the difference between the actual price being paid by you and the valuation made by the bank over and above the 15-20% downpayment required from you.
6) Let your Family inherit your home not your home loan
Make sure to review your insurance requirement when you take on a home loan. If you are underinsured make sure you buy a term policy (it is anyway cheaper than a so called loan cover policy) for the entire amount of loan so that the family can pay off the loan in the event of the borrowers death during the loan tenure. Also consider buying a critical illness rider that will pay off the loan in the event of the borrower suffering from critical illnesses such as Kidney failure, paralytic stroke, cancer, etc.
Do not sign blank application forms or documents and keep a copy of all documents submitted to the lender for your future reference. Any promise made by the DSA or even an official of the lender has no value unless it is in writing or at least on email.
So if you are basing your decision on any such promise make sure you get it in record in some form