Mistakes to Avoid While Applying for Home Loans

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Mistakes to Avoid While Applying for Home Loans
The Home Loans is the biggest liability a person takes in a life. Thus, getting a home loan must be done with deeper research and proper thought process. Getting a home loan help you in relishing the dream of having your own home, thus getting it right is utmost important.
A Home Loan should always be taken after careful thinking and proper analysis
Always remember that borrowing is a big ask and when it comes to borrowing money for around 20 years or so, it becomes a long term liability, which needs to be fulfilled at all costs, without fail for those long years. So, better planning and proper analysis of your finances and responsibilities must be done in order to ensure, everything runs smooth and as planned!
It has been seen that while applying for a home loan, a person ignores several salient points, which must be paid attention at, before finalizing any deal for home loan from any concerned lending agency. Today, we will cover all those mistakes and how to avoid them while applying for a home loan.

Finalizing the Lender
Every one of us wants to know, if we are eligible for home loan. When we start thinking of buying a home, and we don’t have sufficient funds, we start our thought process on what’s the actual amount I can get sanctioned from the bank. If I am eligible enough to apply for a Home Loan? While, these aspects must be surely be paid attention at, there’s nothing wrong in having an initial checkup of the home loan eligibility criteria and the loan amount, which can be paid by the bank to us.
But if agreeing to the bank deal, at the first option, itself is a must? We don’t think so! In fact, most of the banks provide loans for the ready to move in property and for the under construction properties, which are renowned and approved projects of builders.
However, if the property is not legal and faces any legality issues, banks hesitate in approving loans and the chances are that, it will disapprove your loan application. So, what’s the first step, which you must take before applying for the home loan? Yes, you must check the property first, check all the deeds and titles of the property, and all relevant authorization and finalize the pricing, too; only then you must carry out the further process of the Home Application.
There are chances that bank may not be satisfied with some aspects of the home; like location and its valuation, which can lead the bank to revise the sanctioned loan amount. Thus, keeping enough down payment money with you can help you in buying the selected property or else, you will need to look for the other property! Thus, keeping yourself with some additional down payment money and then selecting the property and only then applying for the Home Loan is the best you can kick start your Home Loan Process!

Not ready with Enough Down Payment Money
As discussed above, not keeping you with enough down payment money, may lead to the slippage of chosen property from your hands and you need to start off the complete process from the beginning. It depends on the sole discretion of the bank, to sanction the loan amount, which it feels it should sanction for the concerned property. So, be extra safe and always be ready for the less than expected amount, which will be sanctioned from your chosen bank.
Not getting ready with the enough Down Payment Money is one of the most common mistakes, a person commits, while applying for the home loan. And we advise you to remain extra cautious and not only you should have enough Down Payment, but also extra money in hand, to compensate any less sanctioned amount by the bank. Otherwise you risk losing the chosen property. Also, bank may ask you to furnish the details of the down payment you can arrange on your own. So, be ready to satisfy bank queries.

No Negotiation with your Bank
Another common mistake, a person commits is the no negotiation at all on the home loan. You must remember that every loan is negotiable and there is nothing as fixed. You have the complete right to negotiate any offering by the bank.try to get the maximum loan amount at the most competitive rate of interest from your chosen bank. The better you can negotiate, the cheaper your home loan will be.
You have every right to negotiate on interest rate and even processing fee, legal fee and have all rights to know the hidden charges and also can undergo free evaluation and free documentation check.
While, many people are unaware of the negotiation power, now you are unaware of it, so better negotiate with the lender to get the best deal.

Not comparing offers by different banks
Not comparing offers by different banks and financial institutions will be a big mistake, while you are going for a home loan. Don’t just jump at the first offer made to you. Better do some research work and get the deals and offers from various banks and fintech agencies for your home loan and make a comparison based on all important factors like rate of interest, loan tenure, processing fees, ease and convenience and all other salient features.
Since a home loan is a long term affair, better you do a deeper research and then short list 2-3 banks to get into the deal with. Get your family involved in over the deal comparison and let them know the various offers by banks, to make a better decision on your home loan.

Choice between Fixed and Floating Rate of Interest
Are you well aware of the fixed and floating rate of interest? If you are unsure about both the types of interest, better gather all relevant information about these and then jump to the finalization.
You have the option to avail home loan on any of the interest types; either the fixed rate of interest or the floating rate of interest.
As the name suggests, fixed rate of interest is the one, for which the rate of interest for the entire loan duration is fixed. While, the floating rate of interest is the one, which keeps on changing with the market conditions and whenever the RBI makes any change in the rate of interest, the rate of interest on your home loan will also change.
So, which one’s the best? It entirely depends on the personal choice! However, a recommendation by us states that if you are opting for the home loan for a shorter duration say like 5 years or 7 years, better go for the fixed rate if interest, while, if you are looking forward a longer home loan tenure, floating rate of interest will suit better.
Also, you must ask from your bank, what’s the condition of the floating rates are, as there are some conditions in which the rate of interest for the initial year is fixed, after which the floating rates of interest on home loan is applicable.

Not Buying any Life Insurance or Health Insurance
Another mistake a person most often seen as committing is not buying any life insurance policy. While, life insurance policy is a must especially for home loans, which don’t have any direct impact, but an posing an indirect impact on how you repay your home loan.
Consider, in the case of an emergency condition, where you are bed ridden and have to cover your medical expenses and cannot work anymore; the health insurance will take care of all your medical expenses. Also, in case of an accidental death, life insurance allows your family to cover the living costs with the insurance amount and also will help to repay the home loan. Thus, if you are thinking about the long term by buying a home of your own, better remain equipped to cover all unavoidable unseen future situations.

Stretching too much
While, everyone loves to live in a home of own, as it offers freedom and peace of mind, there are some situations, which don’t lie in our hands. Just to realize a dream of own home, don’t stretch too much that it hampers the way you live. Don’t commit something which you can’t carry for a long term.
A Home Loan is not an affair of 6 months or a year, but is a long term responsibility, which needs to be carried on for 10,15 and 20 years. Thus, keep sufficient funds always with you, in order to cover emergency needs and always focus on the realistic goals. Make sure that the EMIs that you are going to pay every month, is a convenient, which you can pay off quite easily. Never overdo and outstretch your financial aspects, too much just to relish your dream of having a home of your own. Better calculate all your expenses and future goals and then make a wise decision, with the consultation with your entire family.

Defaulting on Credit Card Bills
Are Credit Cards anything to do with the Home Loans? While, many will think, there’s no connection of the Credit Cards and Home Loans, they all wrong. Defaulting on Credit Card Bills, may be the worst mistake you can commit, which can really hamper your approval for home loan.
Defaulting on your Credit Card Bills, highlights that you don’t have money even to service your short term liabilities, then how a long term liability like Home Loan can be covered by you. Always remember a fact that the Banks always play safe and can deny you a home loan, if you are being founded as a defaulter.

High Credit Utilization Ratio
Have you ever come across the word ‘Credit Utilization Ratio’? Credit Utilization ratio indicates a ratio of credit outstanding to the credit limits. A high Credit Utilization ratio indicates that you are a credit hungry person. The higher is the credit utilization, the less is the chance for the approval of the Home Loan.
Did You Know that a number above 30% is seen as a high Credit Utilization Ratio!
A Consistent high Credit Utilization indicates that you are in need of credit to sustain your living expenses and this adversely affects your credit score, which in turn affects your credibility and your chance of Home Loan Approval.

Cash Withdrawal using Credit Card
Another disaster, you can commit while using a credit card is the cash withdrawal using credit card. While, cash withdrawal through a credit card is a dearer affair to do, as the interest rates on credit cards is as high as 36%, it comes with several other disadvantages, as well.
Cash Withdrawal using a credit card indicates that you are going through a bad phase financially and you are in need of credit card money to cover your living expenses.
While, cash withdrawal carry one time charge, the rate of interest begins from the day, you extract the money and even the rates of interest being very high, cash withdrawal through a credit card, is never recommended at all. Also, since you are applying for a home loan, the chances are that you will be blatantly declined a home loan. Thus, it is recommended that you must be extra careful in how you handle your credit cards, especially while you are applying for your home loan.
A Home Loan is a big responsibility, which is a long term responsibility and which needs to be fulfilled with no excuse at all. Failing to repay your home loan can lead you to the loss of the home; a home for which the entire family had their hard times. So, give yourself some time and make a decision based on better thinking! Think deep and collectively with the entire family, before you make up a final call on Home Loan!

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