JOIN USIt is unwise to be too sure of one’s own wisdom. It is healthy to be reminded that the strongest might weaken and the wisest might err, said Mahatma Gandhi. Taking a cue from the pearls of wisdom from the Father of the nation would be a wise way to begin your journey as a home loan customer. You are likely to make some mistake while going in for a home loan and, as a home loan aspirant, being aware of the mistakes can make your journey of buying a home one smooth ride.
Know what you want
Before taking a plunge into home buying process, you should do enough research yourself and not trust someone else’s research. If you don’t take this trouble then you will end up buying a property which either turns out to be unaffordable or it might not be the one you had aspired for.
While talking to the developer, don’t just discuss what you can afford; discuss what you need. Before doing that, do enough research on the projects you are interested in and whether it will suit any particular requirements which you may have.
Striking a balance between your requirement and your budget holds the key to property buying. Needless to say, it will leave your bank balance heavier by several lakhs.
Obtain your credit report
Before starting your negotiations with the bank or Housing Finance Companies (HFCs), you should be ready with your credit report and check for any discrepancies or errors or any negative entries. You should challenge it right away else it will adversely impact your credit score.
It will certainly cost you dear as your negotiating power will take a beating, thus knocking off lakhs from your bank balance. But if your credit history is in great shape, then you can get a great deal with it. If not, you will certainly have difficulty in getting your home loan approved.
Many a times it has been noticed that we just do practical calculations. Say, we allocate 40-45 per cent of our net monthly income as EMI without taking into account expenditures that may come our way during the course of our long-term loan repayment. Thus, you become more ambitious and tend to over borrow, more than you can afford. This way you are stretching yourself financially and inviting stress and anxiety. The pleasure of obtaining a beautiful home is overridden by the pain of over-committing to the mortgage.
Do research on lenders
Don’t go by advertisements in various newspapers talking about interest rates or what your friends and relatives have been offered. Do enough research on price and features comparison sites which are unbiased, transparent and accurate.
Here, you will get interest rates offered across many banks and HFCs along with features like processing fee, pre-payment charges, percentage of loan granted, documents required etc. This research will take you to the right lender and not the ones which have advertised in newspapers or on the television.
Shop around
Shop, shop and shop some more. Do not blindly accept the first loan offer that comes your way. Work towards getting at least one more online offer.
In an online offer, everything is more transparent and straightforward which helps you compare before selecting. During this time, put your financial house in order and get the right numbers so that making several applications is easier which will later result into lot of savings.
Disclose all facts
It is in your interest that you disclose all information truthfully in your loan application. Any manoeuvring here will cost you later. Having large credit card dues and other loans will also have a significant impact on your home loan eligibility. Lenders determine your ability to take on additional EMI burden vis-à-vis your current net income. Larger the burden, lower the loan eligibility amount. Hence, you should disclose all the current liabilities to the lender.
Read your loan agreement
Before you say “I do!”, read the documents carefully as it may have some clauses which will irk you later to no end.
Surely, you will find it frustrating as you want to sink into the joy of getting the mortgage and you may not want your head to explode with so many terms and conditions, and dos and don’ts, but reading through your mortgage documents will ensure that you know exactly what you’re getting into.
Otherwise, you might wake up one day to find yourself tied to a harsh mortgage plan that you accidentally agreed to. If there is a catch in the letter, this is the right time to bring it to your lender’s notice as goes the saying: No point crying over split milk!
Get your finances in order
To avoid this mistake, open an excel sheet and feed all the information regarding your finances like income and expenditure, and, assets and liabilities to know what you can really afford. This will show you your current financial status and will also give projections on your future income and liabilities. This will sort out your affordability issue as discussed earlier. The more sorted you are financially, the better deal you will get.
Home loan insurance cover
You want to leave a “home” for your dear ones and not the “home loan” in the event of your untimely death. Your family will find it difficult to fulfil this obligation. By taking home loan insurance cover, you are insuring your loan and your loved ones’ futures too. These policies pay for the remaining loan on the death of the borrower thus ensuring that the family inherits the home and not the home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to any major illness.
Get the right perspective
Indeed your lender has a big role to play in getting you the loan, but you should not be overwhelmingly grateful to them for doing their job. Many times lenders have vested interests, and you are sometimes misunderstanding the nature of the relationship that can set you up to be taken advantage of. In fact, as a borrower, you should have all the power.
Don’t make the mistake of not checking various charges like processing fees, pre-payment charges, legal fees, valuation fees and other costs. The crux of successful mortgage lies in the research you do and understanding the different mortgages and the housing market you are considering buying into. This is the only way to place yourself in a strong position.