Home is where the loan is

The real estate industry today has seen a huge change as far as the attitude of the buyer is concerned. Today's buyers are more informed and aware and carefully retain other's experiences in their mind so as to extract a lesson from it later. But, even so, the irony is that too many smart people are buying homes and still having problems. Sometimes, it's the quantum of readable material available that is confusing in itself. Want an upper hand when applying for a home loan? Believe it or not, just revisit your basics. 

1. Impact of loan on your personal finance: With the new cash out flows there's bound to be a dent, so you'll need a brand new monthly budget in place. 

2. Know your maximum loan eligibility: Some banks calculate the income available for EMI payments based on an individual’s gross income and not on his disposable income. Do your research here. 

3. Check your CIBIL score: A score above 700 gets home loans easily. The Credit Information Bureau India Ltd (CIBIL) provides a credit score on a scale of 300 to 900 based on your current financial stability, loans existing, card usage, etc. 

4. Co-application: If you want a loan amount higher than what's offered, having a co-applicant with his/her own source of income helps and also make sense from a taxation perspective with each applicant being able to avail the tax benefit available on interest payment of an EMI. 

5. Tenure: Shorter tenures mean greater EMI burden, but your loan is repaid faster. What you would pay as interest over the term of your loan would be substantially lower. 

6. Type of interest rate: The type of interest rate you choose has an impact on the monthly EMIs you pay. It is important that you know the difference between fixed rate home loan and floating rate home loan. 

7. Pre-payment and foreclosure charges: Sometimes, pre-payment of loans may require you to pay a penalty. Do your research well so that there's flexibility if you can close your loan earlier. 

8. Loan Options: Banks generally offer either of the following loan options: Floating Rate Home Loans and Fixed Rate Home Loans. The EMI of a floating rate loan changes with changes in market interest rates. 

9. Take cover: A life insurance plan that covers the re-payment of loan in the event of an unfortunate death of the borrower can at least help the family retain their home. 

10. Loan transfers: Old customers have higher rates of interest while the new ones have lower rates. So, over time the good deal turns into a sour deal. So the cost of switching is always high. 

11. Implications of delayed payments: Try to clear your EMIs in time because once you are declared a defaulter or your credit history turns bad, and taking any kind of loan in the future may be an issue. 

12. Read the documents carefully before you sign: Check the documents to ensure that the terms are same as what you negotiated and agreed upon. Don’t let the bunch of home loan documents bog you down and just sign on the dotted lines. 

Buying a home is an important personal finance decision for every individual. Before applying for a home loan and paying your processing fee, make sure you analyze the above aspects to get a satisfying and smooth deal