Best way to prepare yourself for the Home Loan!
The decision of buying a house is generally a significant one for every prospective homebuyer. There involves a lot of planning, market research, selection of the property, understanding of the finance, and so much more. Other than the basics, one of the equally important aspects of the home buying is procuring a Home Loan.
In this article, we are going to discuss everything you need to know in order to prepare yourself for Home Loan procurement to fulfill your home buying dream.
How to begin the process?
There is no doubt about the fact that home loan application and sanctioning is a long and cumbersome process. In fact, a lot of people find it difficult to understand how to approach the process and enhance their chances of home loan sanctioning.
Whether you are first-time property investor or a seasoned one, below are some of the tips to smoothly trade the home loan application process and become completely home loan ready.
Clear off any existing debt before applying for the loan
One of the first things that the banks and financial institutions look for, in case of home loans financing and refinancing, is the payment history of the borrower. If you are running several loans such as vehicle loan, consumer durable loan etc, it is best to clear off all the dues before you apply for the home loan.
While considering the Home Loan application, lenders often assess the borrowers’ debt-to-income ratio to find the loan eligibility. The debt-income ratio is nothing but the borrowers’ monthly debt obligations against their monthly income. It is a way to find how comfortable they can take on more debt. The lesser the number of EMIs/dues borrower pays every month, more is their loan eligibility based on their total income, and higher the chances of home loan sanctioning.
Improve your credit report
A strong credit score and a clean credit report play an important role when it comes to any type of lending including the home loans. In fact, the borrower’s credit report is the first thing that the lenders refer to, before taking the home loan application any further.
To make yourself Home Loan ready, check your credit information report at least few months before you apply for the loan. Not only it will allow you the time to take the necessary corrective measures to improve your credit scores, it will also boost your confidence as you apply for the Home Loan.
One of the immediate steps you can do to clean your credit report is to pay off all the existing dues, previous late payment charges etc. and ensure that all the upcoming payments, dues, EMI’s, credit card bills etc are made on time before you begin the process of home loan application.
Make sure that your documents are in place
Whether you salaried, self-employed professional or self-employed businessman, one of the important home loan etiquettes is to keep the entire documentation in place. Some of the essential documents you should start preparing before the home loan application include-
- Latest pay slips from the current employer
- All the educational qualification certificates
- Accurate proof of business existence
- Bank statement records of the past 1 year
- Profit/loss statement and balance sheet of the business for last 3 years
- Complete property papers that you wish to purchase. It is important to remember that banks do not process the home loan application without the valid ‘agreement to buy/ sell’ the property to wish to buy
Research and understand lenders loan process thoroughly
An important aspect of being Home Loan ready is to be fully prepared for the home loan lending procedure. Research your options, understand the entire procedure, and get yourself ready for a lot of queries, document verification, phone calls, one-to-one meetings, field verifications etc
It is important to understand that home loan lending requires the lenders to be fully assured of the borrower’s credibility and the ability to pay back. As a borrower, cooperate with the lender while they follow a detailed verification and mortgage sanctioning process.
Go for a Home Loan suitable for your financial situation
Last but not the least, look closely at Home Loan/ mortgage you’re applying for to find the best fit for your financial situation. For e.g.:
- Fixed rate mortgage: In which the borrower gets a higher starting rate along with the security that their monthly payments will remain the same
- Adjustable rate mortgage: In which the interest rate often starts lower initially and could increase gradually making it difficult to keep up with the payments.
Home buying is a big decision that helps the borrower build home equity and a chance to qualify for tax deductions as well. To make sure that you get the benefits of these finer aspects, find a Home Loan/ Mortgage that is most suitable for your financial situation.