Most people who intend to buy a house for then home loan has become an essential way to fund the process. While financial institutes are willing to fund your home loan, there are times when the process can become a nightmare. When borrowers commit some mistakes when applying for a loan, the chances are it will get rejected. There are several other crucial mistakes to avoid for a home loan that, as a home buyer, you should be aware of if you are looking for a smooth and hassle-free service. Let’s cover the common 5 mistakes to avoid when applying for a home loan.
Here are the top 5 mistakes you should avoid when you are applying for a home loan.
1. Insufficient Down Payment Fund
Whether you intend to buy 2 and 3 BHK flats in Pune, generally, the bank will give you 80 percent of the property’s value when you apply for a home loan. This means you have to provide the remaining 20 percent of the property’s value, which is the down payment. Hence, it is essential that you know the property’s cost and has enough down payment money before applying for the loan. As a borrower, you have to provide the down payment before the bank starts disbursing the loan. In case you fail with the down payment or the margin money, your loan will get canceled.
2. Failure to Ensure Creditworthiness
After knowing about your property worth and having the down payment with you, one of the initial steps is to know your credit score. Having a healthy credit score is essential for the bank to credit you the loan. A bank will check your credit report from the credit bureau and see if it is above 700. Any score above 700 is deemed favorable by the bank and will allow you to apply for a loan in the best banks. On the other hand, a poor repayment history or poor credit will reduce your chance to get the loan approved. However, there are ways you can improve your credit score in case it is poor. Talk to a financial institute on how to improve the credit score.
3. Stay Away From Short Term Tenure
When you opt for short-term tenure for the loan, your EMIs are going to be considerably high. This leads to the risk of default in the repayment. So, if you want to warrant safe and secure repayment of the EMI. Availing of a longer tenure is a better option as it will ease the EMI.
4. Overestimating Repayment Capacity
A bank will look into your other liabilities before granting you the loan, so it is always better to include your other monthly expenses when you are taking the loan and calculating the EMI. Always bear in mind your EMI should be within 30 to 40 percent of your income, so your loan doesn’t get rejected.
5. Failure to Take Insurance Cover
Even if you are 100 percent sure that you will be able to pay off your loan within the given time, taking an appropriate insurance cover is a must. It will ensure you and your family is protected from any unforeseen financial distress. In case of a tragedy that leads to you being unable to repay the loan, the insurance will help clear the debt.
Now that you know the pitfalls to avoid when taking a home loan, it is time for you to look into properties to purchase, like a 3 BHK flat for sale in Pune. If interested, visit majheghar.com, where you see all the available property. These are some common mistakes to avoid when applying for a home loan.