Common Home Loan Application Mistakes To Avoid
Ensure that you have taken the time out to research your options thoroughly and weigh your options. Read on to know about the common mistakes home loan applicants make and how to avoid them.
Home loans are a long-term financial commitment and selecting the ideal loan is a critical decision which, if taken correctly, can save money and unnecessary hassles for the entire loan duration. Availing of a home loan can be easy if planned for correctly. It is crucial that aspiring home loan borrowers take care while making their home loan applications to avoid facing rejections, or unfavourable home loan terms.
Often, home loan applicants make common errors that can lead to poorer home loan prospects. In this article, we highlight the typical mistakes borrowers tend to make, and how best to avoid them to enhance your loan eligibility and approval chances.
Common Home Loan Application Errors To Look Out For
Before you proceed with your home loan application, ensure that you have taken the time out to research your options thoroughly and weigh your options. Read on to know about the common mistakes home loan applicants make and how to avoid them.
Compare Loan Deals
Just as lenders are legally obligated to assess your profile thoroughly before extending a home loan to you, you too are entitled to compare lenders, their offerings, their reviews and their policies before you select the home loan lender of your choice. Some of the key parameters of your enquiry should include:
- What are the lender’s home loan eligibility criteria?
- What rate on interest is the lender currently offering, and does it align with the market trends?
- Does the lender have a good reputation in regard to borrower services and post-disbursal services?
- Does the lender offer borrowers the facility to link their home loans to an external benchmark, such as the RBI repo rate?
Such questions not only help you gain clarity about the home loan agreement you will enter but will also help you sharpen your loan eligibility to meet the lender’s parameters.
Select The Right Loan
Borrowers should make prudent choices so that they do not end up with unfavourable loan terms such as a high home loan interest rate, which might make loan repayments difficult.
It is imperative that you apply for the right home loan amount that suits your homebuying needs, budget and repayment capacity. Selecting a loan amount that you can reasonably pay back without difficulties projects you as a low-risk borrower to the lender, enhancing your chances of speedy home loan approval. Consider using a home loan EMI calculator to help in your assessment.
Plan For The Loan
Before approving a home loan, lenders will want to know the purpose of the loan and how the money would be utilised. They will evaluate whether you will be able to repay the borrowed money within the stipulated time frame. So, chart a road map that will safely see you through the entire loan tenor, keeping in mind necessary expenditures to account for future exigencies and other commitments along the way.
Organised Paperwork
Your loan documentation and paperwork should be in order. Even one missing or erroneous document can delay your loan approval. Therefore, check the lender's list of documentation and organise them accordingly.
When you submit original property documents to the lender, keep track of the acknowledgements, either through e-mail or on paper. Always opt for written communication with the lender to avoid any confusion regarding the home loan process, implied charges, turnaround time, special offers, rates of interest, etc.
Credit Rating
A good credit score is integral to loan eligibility. It gives you greater negotiating power and can effectively secure lower interest rates with suitable terms. Therefore, study your credit report in detail to check for discrepancies, which should be rectified with the credit agency, before you apply for a home loan.
The Fine Print
Home loan applicants can often be unmindful about reading loan offer documents, forms, and lender policy and conditions. Especially, once the home loan is sanctioned, it is important to go through the loan agreement issued by the lender before signing it.
Right from the reset clause around the interest rate to dealing with defaults, the agreement contains the lender's terms and conditions with respect to home loan charges, instalments, rate changes, etc. making it crucial for the borrower to be aware of every detail.
Hidden Fees
Most lenders convey loan charges upfront, yet there could be some that may not be clear at first glance, such as documentation charges, late payment penalties, charges to change the loan tenor and so on. When you read the loan agreement, check for these hidden fees, and request the lender to provide further details or clarifications.
Summing Up
When it comes to home loans, one should not bank on rough estimates and hearsay. Do your due diligence so as to leave no room for errors. Use online home loan EMI calculators to get an overview of the loan and to compute your EMIs accurately. Once you determine loan affordability, you can also use a loan calculator to customise your home loan as per preference and convenience.
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