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7 Things You Must Know Before You Get Home Loan

Updated: Sep 5, 2022

Building a new house is the range of the biggest financial investments you will ever consider. But expenses are huge to make it habitable and convenient. And that's why most people get a home loan which can make their dream alive. However, there are several things you must know before getting a home loan. Since it's a commitment for years you need to know everything it obligates. So follow the blog till the end to know 7 things about the home loan.

7 Main Things You Must Know Before You Get Home Loan

Eligibility Criteria

If you think getting a home loan is an easy and one-step process, you are dead wrong. Instead, it possesses many steps and the first one of them is eligibility criteria. In this step make sure that you qualify for a housing loan. In the beginning, lenders will assess your eligibility for a home loan based on your income and repayment capacity. In this matter, lenders assess several things which include age, financial position, qualification, and many more.

The Type of Home Loan

Home loans are divided into three types. And you need to be aware of all of them before getting a loan for your home. The three types of home loans are adjustable home loans, fixed-rate home loans, and combination home loans.

An adjustable or floating home loan where both benchmark rate and interest rate are flexible. Then comes fixed-rate loans, where both benchmark rate and interest rate are rigid. And lastly, a combination loan that offers a part adjustable and a part fixed.

Get Home Before Getting Loan

Getting a loan before selecting a home is some of the major mistakes people make while building a house. It doesn’t matter whether you are buying a home or building it from scratch, getting pre-approval helps you a lot in this matter. Pre-approval helps you fix your exact budget and makes your first move in the real estate market.

Amount Of The Loan

The loan amount is another important factor you must consider before getting a home for your new house. Most lenders provide home loans ranging from 75% to 90% of the cost of the property relying on loan value. So if the property value is 5 million dollars, you can ask for a maximum of 4 million dollars, depending on your home loan eligibility.

Cost of Your Home Loan

One of the hardest parts of getting a home loan is its cost. And few common factors that affect the cost of home loans are interest payments, processing fees, administrative charges, prepayment penalties, etc. However, there is an exception! There would be no payment charges when you get adjustable/floating rate loans. You can convert your loan to a lower rate by just paying a nominal fee.

Amount For EMI/Pre-EMI

EMI or Equated Monthly Instalment is an amount you need to pay to the lender every month. EMI is basically a repayment of the principal amount and payment of the interest on the outstanding amount of the loan.

Meanwhile, Pre-EMI is a concept that is used for properties that are under construction. Suppose you started building your home with a loan and start repaying when its home construction is not yet completed.

Tenure Of The Loan

The final factor you need to consider while getting home for new home construction is the tenure of the loan. And this is not just to get a better time in your hand but to assess the interest amount you have to pay. Generally, home loans get sanctioned for a maximum period of 30 years, sometimes depending on the customer’s eligibility. A longer tenure helps reduce the EMI burden.

Here are the 7 main things you must know before you apply for a home loan. Following these points would help you to prepare for forthcoming risks. Besides, it would also help you to be stress-free in the entire process. To make it easier don't forget to apply for a loan from us.

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