You have decided to buy a home, and are going for a home loan but are still unsure if the application meets your lender’s standards. While some will tell you to take the leap without another thought, we believe in caution before action – which just means thorough research and due diligence, before you take the flight to your new, dream home.
There are a lot of common errors in the incoming home loan applications that are small, but significant, often costing the borrower dearly – by way of home loan rejection, or high-interest rates and short repayment tenors. However, these mistakes are easy to spot, if you know what to look for and how to plan against them. Most of these are avoidable but hasty, last-minute applications can look over these and lead to an unpleasant outcome.
This article takes a look at the top common errors home loan applicants fall prey to. Take a look before you start preparing your home loan application, to enhance your chances of scoring a home loan with attractive benefits, such as a low housing loan interest rate, comfortable EMIs and a flexible repayment tenor.
3 Home Loan Application Mistakes to Beware of
Listed below are some of the most common home loan application errors that lesser-informed home loan applicants can tend to make. Pay heed, to stay clear of these.
Mistake 1: Applying without checking your home loan eligibility
While lenders can have their specific home loan eligibility parameters, commonly, they all test similar aspects of an applicant’s profile, which include the following:
- Income sources
- Employment
- Age
- Credit score
- Ongoing debt obligations
- Repayment capacity
- Fixed monthly payments
- Current financial standing
- Property profile
- Past repayment habits and patterns
Lenders are obliged to appraise the applicant’s eligibility to ensure whether their repayment capacity can accommodate the repayment pressure of the home loan amount they seek. It also tells them enough about the applicant’s financial and repayment habits, which determines the terms of your home loan.
All lenders today advertise their home loan eligibility criteria on either their website or at the branch level. Home loan aspirants are advised to match their present home loan eligibility against that of their preferred lenders’, to see how eligibility they stand to be in the latter’s books. If there’s room for improvement, take time to boost your eligibility instead of making a fruitless home loan application.
Mistake 2: Not planning for the property down payment
The fact that you have to also pay a certain portion of the property’s value out of your pocket should not come as a surprise to you if you’ve spent some time researching and planning your property purchase. The RBI (Reserve Bank of India) allows lenders to sanction home loans that can go up to nearly 90% of the property’s value and no lender is permitted to offer the entire property value as the home loan amount. This leaves you, the homebuyer, to fund the property down payment yourself.
It is essential that you also plan for this expense, as it could throw your home loan plans awry if you don’t have the token amount ready to book the property. While many homebuyers opt for an additional loan, such as a personal loan to plug in the gap in the financing, lenders prefer that you pay the down payment yourself. Having adequate funds handy positions you as a fiscally responsible individual, with considerable fall-back savings, in the time of need.
Mistake 3: Overstating your repayment capacity
Lenders offer home loans that can cover properties worth Rs. 5 crores, or sometimes even higher, such as Rs. 25 Crores, if your eligibility permits it. However, just because the facility allows it doesn’t mean that applicants opt for an amount that is out of their repayment capacity. Home loans can often take up to almost 30 years to repay, so it is important that you commit to a repayment schedule that can also fit into your other financial obligations and future aspirations.
