Apply for a home loan? Important points to keep in mind before choosing a lender


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Apply for a home loan? Important points to keep in mind before choosing a lender | Photo credit: BCCL

New Delhi: Obtaining a home loan is one of the most important financial decisions of life, as it is a long-term commitment that is very expensive. Usually, though, real estate dealers shower potential buyers with discounts, payment plans and freebies, and banks and home finance companies (HFCs) have also put out special offers on home loans during the holiday season.

So, once you have chosen the property, the next big decision is identifying the bank or financial institution.

When choosing a lender for your home loan, here are certain factors to consider:

Loan amount and eligibility

It is the monthly income of a person on the basis of which the amount of the loan is determined. Also, the amount borrowed is determined based on the value of the property. The loan amount granted is 80 percent – 90 percent of the value of the property.

The interest rate

The EMI and the interest outflow depend on the interest on the home loan. Research the market before finalizing the bank from whom you are taking out the loan. Try to get the lowest interest rate on the loan. You should also decide that the loan you choose has a fixed rate or variable rate.

Processing fees and prepayment

The processing fee is the fee that banks charge for processing the loan. This can be anywhere from 0.25 percent to 2 percent of the loan amount. Lenders also set terms regarding prepayment.

Getting the documents in order

A typical loan application requires the borrower to prove identity, address, and income. For example, preparing income requires income tax returns, Form 16, payslips, GST returns, bank statements, or anything else.

Lead time

The time it takes to penalize and pay out home loans varies from bank to bank. On average, banks take about five days to approve a home loan, provided all documents are in order. There are a number of post payout services involved. This includes getting periodic account statements and interest receipts on time. Choose a lender with strong systems and a good track record

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