Everything you need to know before applying for a Home Loan


Home loans are an essential tool to fund the purchase of your home. You can build a home to avail  financial benefits such as investing the house as real estate or renting it and earning monthly rental  income. You can also avail loan to build your dream house without worrying about the insufficiency  of funds. Home loans are repaid back in equal monthly instalments (EMI) over the time period of the  loan. 

Before applying for a home loan, there’s so much that you need to know to save yourself from  making the wrong loan purchase. Let’s discuss all such vital facts about home loans in detail: 

Different types of interest rates: A home loan’s interest rate is crucial to consider before applying  for a loan. There are two primary interest rate types that you need to know given as follows: 

Fixed interest rate: As the name suggests, the fixed interest rate is fixed throughout the  tenure. It is the most common type of interest rate on loans. If you opt for a fixed interest  rate, you can easily calculate the EMI on loan even before applying. 

Floating interest rate: floating interest rate varies throughout the loan tenure. The rate of  interest changes on loans changes every quarter as per the market rate. It can be a little  difficult to calculate your EMI since the interest rate keeps changing. 

Eligibility: It is yet another critical criterion to decide if you will be approved a loan or not. Loan  eligibility can differ from bank to bank. You have to get it checked on your lender’s website before  applying to find out if you fit. Some of the standard eligibility criteria across major banks are given  as follows: 

Age of borrower 

Residency status 

Education qualification 

Employment status 

No. of dependents 

Credit score 

These points help the lender determine if you are suitable to receive a home loan or not. Among all,  credit score and job stability play a significant role. 

Loan interest rate: Before fixing a lender, you should compare at least 4 to 5 lenders to determine  the right fit for you. Approaching a bank, you have past relations with plays a good role since you  can negotiate the interest rate. Maintaining a good credit history helps get a less home loan interest rates

Maintain a good credit score: Credit score is a three-digit numeric code that determines your  creditworthiness to obtain a loan. Credit scores can range from 300 to 900. A credit score of 700 or  above is considered optimal. If you wish to get a loan at less interest rate, you need to maintain a  good credit score. You can do so by keeping a clear repayment history. Thus, repay all your credits  on time and never miss a deadline. 

Tenure of the loan: Home loans are sanctioned for 30 years. Longer tenure helps since the EMI  decreases, but the loan becomes costlier if the tenure is set too long. It happens because you end up  paying more interest rates in a longer time frame. Thus, there should be a balance between tenure  and EMI. 

Know all the additional charges: there are charges involved in the approval of the loan process. You  should know about all the additional charges that can affect the loan cost. Charges such as  processing fees, administrative, processing, and service charges can affect your loan cost. You should  consult with your lender before confirming the loan. 

Default on loan repayment: Paying the EMI on time is essential because non-repayment worsens  your credit score. Also, in case the borrower defaults three times consecutively, the lender has the 

right to send the notice. As the collateral in the case of a home loan is the property itself, you must  check your financial health and apply only after you are sure of repayments. 

Prepare all the documentation required: It is essential to keep all the required documents handy  before applying for a home loan. It makes the loaning process smother. Some very common  documents needed in the case of home loans are given below: 

Identity proof 

Residency proof 

Property details documents 

Salary certificate 

Education qualification certificate 

Last three-year income tax return 


Now you know all the facts regarding a home loan and all the documents you need to be ready if you  apply for a home loan. Make sure to look for the eligibility criteria and your financial status before  applying for a loan. Apply for a home loan only when you are ready to take the loan burden, pay it  back within the stipulated time period, and you are good to go.

Olivia Hazelhttps://mashhap.com/
Technical Content writer, who loves to pen down her thoughts and insights in the best way possible.

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