Few things you must know before applying for home loans.

Posted by Anurag Mishra on April 14th, 2017

While purchasing a dream home with real estate prices hitting the roof, taking home loans has become an inevitable part of your finance. Many times while applying for a home loans there are various jargons that will create unnecessary confusion in your minds. So, before you evaluate your loan options, from leading banks and finance companies in India, there are few terms you will come across every application procedure:

Equated Monthly Installments

It’s a fixed amount you will need to pay to the bank or NBFC every month in order to lighten down the burden of your housing finance. An EMI is an unequal combination of your loan amount and the rate of interest. It is calculated based on principal, repayment period and rate of interest.

Margin or Down Payment

Any bank or finance company will not give 100% of home loans amount to buy your dream property. Ideally, based on your credit score, property location and income source you get qualified for around 80 to 85% of the property costs. The remaining that you will have to shell out of your pockets is termed “margin money”. Experts say it’s better to prepare with this amount before applying for any form of housing loan.

Credit Score

Before sanctioning your loan bank or NBFC will check your financial status to determine your loan eligibility and arrive at a lending amount. The parameters would be your income source, age, co-applicants income status, occupation, stability, property location, tax history and last but not the least your CIBIL score. They will also look into your existing debt or liabilities. The entire process is termed as credit appraisal.

Full Disbursement

Full Disbursement is when the loan amount is paid at one go. Either it gets direct credit to the bank account of the developer or you will receive a cheque bearing the entire amount. The bank will disburse only when you have submitted all required documents and have made the down payment.

Pre-Approved Property

Many builders get their properties pre-approved by home loans financers. Bank or NBFC’s providing loan options usually examine all the documentation before approval for the particular builder. Along with this the builder’s ability and track record on project completion, maintenance is also being evaluated. It ensures the builder has a good track record and together you can make your home buying decision easier.

Offer letter

Once the loan gets sanctioned, you will get an offer letter stating all the details of your loan like sanction amount, loan duration, interest rates applicable, other charges, monthly installments, etc. This letter is an offer that banks or finance company will make towards your housing loan requirements. It’s not the loan amount disbursed. Once you agree to make repayments and fulfill other legal formalities the amount will be disbursed to your account.

There are leading banks and housing finance companies in India that offer a loan with customized benefits. Just visiting the very first bank or NFBC and applying for a loan is wrong. Instead compare the online quotes in terms of loan eligibility, home loans interest rates applicable, processing, stamp duty & registration charges, loan tenure, repayment options etc. and then go for a suitable loan application.

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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
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