These have been specifically designed so that you do not miss the opportunity to make those dreams come true without having to pay all the money in advance. However, taking out a home loan can seem like a complicated process. There are many factors associated with a home loan that you need to know before taking out a loan. The most prominent are listed below: -

1. Factors that can affect the eligibility criteria: The best way to calculate the eligibility of your mortgage loan is to calculate the EMI. In general, banks limit the amount to 40-50% of the borrower's income, including the basic salary and the allocation of expenses. It also considers the credit history of a borrower. Therefore, if you have an existing loan or a low credit score, the loan amount will be further reduced or you may have to pay a higher interest rate on the home loan. People with a stable income, a strong ability to pay, and a good credit score find it relatively easy to obtain a loan compared to those with irregular earnings and a poor credit history. Also, having a co-applicant allows you to easily get a home loan.

2. Understand your type of loan: Banks offer mortgage loans at two interest rates: the fixed interest loan and the variable interest loan. The fixed interest loan is a type of mortgage loan where the interest rates remain the same and the borrower has to pay a fixed IME throughout the term of the loan. By contrast, in the case of a floating interest rate, it varies according to the market conditions that lead to the fluctuation in the amount of EMI more frequently. This is why fixed-rate home loans have an interest rate of 1 to 2.5% higher than variable-rate loans.

3. The interest rate: Whatever type of home loan you choose, don't forget to negotiate on the rate. Although banks would always have an advantage, you will have to haggle with this, especially if you have been a loyal customer of the bank and have a savings account at the same bank. Trading would be much easier if you have a clear credit history. In addition, you can also benefit if you apply for the loan at the end of the month. Since banks have business goals, they can be more flexible right now if they want business.

4. The fine print: A home loan agreement is a legal document that contains all the details of the loan. If you think that not paying EMI on time will only cause problems, you are wrong! There are many hidden clauses in the fine print. Therefore, it is recommended to carefully read the final documents of the loan agreement before signing the dotted line. Watch out for the loan processing fee, penalty fees, hidden clauses, service charges, and prepayment penalty, etc. Any negligence in this context would lead to further problems in the future.

5. A longer loan term means more expensive loans: as a general rule, the longer the loan term, the higher the interest you are likely to pay over a period of time. Many can afford this increase, but not all can. Therefore, it is advisable to request a loan amount that you can easily repay in the shortest time. In this way, you may have to pay large EMI but for a shorter period and without increasing the interest rate.

Here are some things to keep in mind when applying for a home loan. Keep in mind that if you get a loan from a bank it does not mean that you are stuck there until the time your loan is fully paid off, https://www.cambridgehomeloan.com/vahomeloan/.

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Important things to know before taking out a home loan