Why is a Home loan needed?
The reason we need home loan is obvious. One of the basic necessity of every human being is shelter. Modern times have made this basic necessity a dream which is fulfilled by not every one. To make this dream a reality, that is to buy a home you require a strong bank balance. Unfortunately, not everyone has it. So then there is the option of getting a home loan. Even though you get telemarketing calls where banks are ready to give you a home loan, when actually trying to get a loan, it is a tedious process. This article will speak about some things which you must know about home loans.
Are you Eligible for a Loan?
Home loan is given not only for buying a home but also if you want to buy a plot of land and later want to construct your home. But before you go for a loan, you need to fulfill all eligibility criteria for a home loan. That is the hard part. If you are a businessman with a strong balance sheet, you will get a loan easily. For those in the government or private sector jobs, its necessary that your salary is enough to repay the loan amount in installments. Based on your capacity to pay, the bank will sanction a home loan. Also, most banks will pay 70 to 80 percent of the home loan amount, the rest which is the down payment, you have to arrange from your personal savings or other resources.
Compare all options
Before going for a home loan, it is necessary that you check loan schemes of different banks. Some banks may waive the processing fee which is 0.5 to 1% of the loan amount. Although percentage wise it looks tiny, but if you do the math you will find that 1% is also a big amount. Also see if the interest is flat or floating. In flat interest rates, the interest rates remain the same throughout the repayment period. In floating interest rates, the interest rates are flexible, which means the interest rate will keep on changing throughout the repayment period although with some terms and conditions. Each has its pros and cons which is not the subject of the this article. I will cover that topic in another article.
Some other requirements
A bank will ask for plethora of documents in order to check your employment status, capacity to pay, etc. Also, keep in mind that if there is requirement of a co-applicant in your country, it can be your spouse or one of your family members. It good if you insure your loan amount. In case of unfortunate circumstances like death, the burden must not fall on your loved ones. So better safe than sorry.
Getting a home loan might sound a difficult thing to do, but trust me, it is not. Banks are ready to give you a home loan as bank earns from the interest your pay on repayments or your EMIs. The wise thing to do is to check what each bank offers before rushing to get it. It is better to plan before than to regret later on, as once you get a loan you have to spend many years repaying it.