Checklist To Consider Before Applying For Home Loan

By RimTim Staff Writer
December 8, 2017

In India, most private sector banks depend on loan agents to get the consumer to their doorstep. The loan agent or direct selling agent (DSA), as they are called, help consumers with their application for home loans, offer advice on home loan interest rates, mortgage rates and much more.

The presence of loan agents allows private banks to process housing much faster than public sector banks and helps them keep customers up to date with the latest home loan interest rates. DSAs hired by banks have strict sales targets that have to be met, so they often go out of the way to market housing loans to customers.

Home loans are easily available in India. There are so many private sector banks that provide them at affordable interest rates, but it is important to be cautious when opting for a loan. There are so many things that one should consider as a checklist such as the loan percentage, fixed and floating interest rates, whether there are any concessions for senior citizens or women, and if there is a prepayment option available.

Private sector banks vs Public sector banks

In India, private banks such as HDFC, ICICI, and Axis Bank, to name just a few, update their loan schemes every now and then, based on the current economic scenario in the country. The RBI Policy has a big role to play in the mortgage rates that are ultimately offered to consumers.

Public sector banks, on the other hand, are not as flexible as private sector banks when it comes to home loan interest rates. They are very slow at adjusting to the latest economic news and trends. That’s one reason why private sector banks such as HDFC have stolen a march over the public sector. They have been able to capitalize on the inefficiency of nationalized banks and offer better loan products to consumers.

Things to consider when applying for a housing loan

Applying for a home loan is a once in a lifetime decision for most people. After all, buying a home can be so expensive that most Indians do it only once. It takes up a substantial part of your savings and paying down the home loan would tie down your income for years to come.

With so many different home loan products available in the market, choosing one that would suit your requirements perfectly is a tough ask. You can ask a loan agent for help on selecting the right housing loan product, but this is a decision you must take by yourself, after having done your research and evaluating your options.

Visual checklist to consider when applying for a housing loan

Infographic -Applying for Home Loan

  • Research – We have already talked about it. Don’t follow your loan agent’s advice blindly. They might have their own self-interest in recommending a particular loan option. Do your research and investigate which lender offers the best interest rates, with processing fees and the most agreeable foreclosure terms.
  • Savings – You must opt for a loan that would allow you to save as much as possible on the monthly payments. Every rupee you save during the tenure of the home loan is a rupee earned. You can use the money saved in this manner to foreclose the loan quickly.
  • Floating rates vs Fixed rates – You will have two choices when taking a loan – floating rates and fixed rates. Floating rate loans have their interest rates linked to the market while fixed rate loans have a fixed interest rate. Over the long term, you will save more with floating rates than with fixed rates.
  • CIBIL Score – A high CIBIL Score can significantly improve your chances of getting a home loan at attractive interest rates. Your credit score should be 750+ to get your loan application approved quickly.
  • Foreclosure Terms – In the past, consumers had to pay foreclosure penalties – that’s no longer the case today. You won’t need to pay anything extra for foreclosing the loan, but make sure of it. Save as much as possible to be able to foreclose your loan quickly. The faster you foreclose the loan, the more money you will have on your hands, which you can use for the other things that are important to you.

Final thought on getting a home loan

Read the loan agreement very carefully before signing on the dotted line. Go through the fine print and make sure you agree to all the terms and conditions. Ensure that there is no confusion of any sort on the home loan interest rates. If you need any clarification on any of the terms, ask the loan agent.

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