Getting a Home Loan to Buy Your Dream Home - Tata Capital

Getting a Home Loan to Buy Your Dream Home

Mar 07, 2017

Buying a house is the biggest financial decision of most people's lives. The reason is that it has a lot of emotional value (of owning a house) and also a lot of financial weight (given the high costs).

Though there is nothing much to say about the emotional aspect of this decision, one can discuss a lot about the financial aspect. Due to the high cost of real estate, it more or less fact that people will purchase house using borrowed money. But before you apply for the home loan, it is important to do your homework thoroughly.

Before you even choose a property, you need to ascertain your budget. Once the budget is fixed, you can then search for properties that fit into your chosen critieras.

Suppose you want to purchase a house worth Rs 40 lacs. The next thing to understand is that generally, lenders will only fund 80% of the cost, i.e. Rs 32 lacs. So you need to arrange remaining 20% (Rs 8 lacs) from your own sources.

Next, be very clear about your understanding of interest rates. You can choose among floating or fixed type of loans. Simply understand that lower the rates are, lower will be your EMIs. Also, make sure that they total interest outflow over the life of the loan is lowest among all available options.

Lenders too put in some safety checks to ensure that they do not lend to someone who is under a lot of financial stress. So if you already have few EMIs that eat up upto 40% of your monthly income, then your loan application will be rejected. Clearing off some of your loans might be a wise thing to do before you apply for a home loan.

A lot of weightage is given to good credit score when processing loan applications. So ensure that you only apply when you have built up a decent credit track record.

Getting a home loan is not very difficult if you keep the above discussed points in mind. So do a self-analysis of your finances before you think about taking a home loan.