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Home Loan

5 mistakes to avoid while availing a Home Loan

Summary: Borrowing a home loan requires thorough analysis and planning, as it is a long-term and expensive commitment. Get more Personal Finance News and Business News on Zee Business.

30 Apr 2022 by Team FinFIRST

Whether it is not accumulating enough corpus for the down payment or overestimating your EMI repayment capacity, here are five common mistakes to avoid while applying for a home loan. 

For most people, purchasing their dream home boils down to availing a decent home loan in the market. With home loan interest rates at a record ten-year low in 2021, there has hardly been a better time to apply for one. But don’t rush your decision. While buying a home is an emotional decision, you must understand its long-term implications and carry out thorough research to avoid common mistakes that will not only dent your chances but also put you into a spot of financial bother.

Let’s take a look at five common mistakes that you should avoid at all costs while availing a home loan.

1. Not reviewing Home Loan eligibility before applying
 

For lenders, your credit score is a crucial factor to determine your creditworthiness. Essentially, your credit score evaluates your credit and repayment history, and establishes whether you are eligible for a good home loan. Usually, 750 or higher is considered to be a good score. In fact, the better your credit score, the better your chances of getting your loan sanctioned and at a lower interest rate. Hence, it is important to track your credit score and even try to improve it before applying for a successful home loan.

 

 

2. Conducting a flimsy market research (or not at all)


Given the fact that a home loan is a long-term commitment that requires a huge investment, even a small difference in interest rates can prove to be huge. As such, all you must evaluate your options carefully and only opt a lender that offers you the complete package – a good interest rate, favourable repayment terms, a higher loan amount, and more. Remember, a home loan is also a long-term relationship. You don’t want to be stuck with a lender who is not accommodating, especially during emergencies. Also, make sure to read the fine print before signing off on the loan terms. Tip: consult with professionals and any borrowers you might know, or look for reviews and ratings on borrower experiences online. You can easily read IDFC home loan reviews on our website or other reputed portals before making up your mind.

3. Not accumulating adequate corpus for Home Loan down payment


As you might already know, you can only avail up to 75-90% of the property value from your lender. The rest of the amount has to be deposited in the form of a down payment or a margin contribution before you can avail a loan. Thus, it is very important to first ensure that you have the adequate corpus with you for the same. Bear in mind that you don’t have to compromise your other emergency savings to make up the corpus. That’s a huge risk. Additionally, if you are able, try to make as high a down payment as possible to reduce the total loan amount and get a better loan deal.

4. Overestimating your EMI repayment capacity


Before saying yes to a home loan, always evaluate whether you are ready to pay a certain EMI for a certain tenor. Here, borrowers often make the mistake of factoring in future income or salary growth to agree for higher EMIs. This puts them at risk of non-payment in the future. Tip: Your total home loan EMI obligation should not exceed 40% of your income. If that is not the case, or you have high monthly expenses, then include all of your financial outflow before determining the right EMI amount. home loan EMI calculators can help you calculate the optimum amount basis your repayment capacity. Check out IDFC FIRST Bank’s EMI calculator.

Make sure your total Home Loan EMI obligation does not exceed 40% of your income.


5. Failing to consider a Home Loan Insurance cover


At the end of the day, your goal should be to not turn your home loan into a distressing financial liability. Remember, emergencies can strike at any time which could lead to future repayment issues in your EMIs. Hence, it is always a good idea to insure yourself against all such possibilities and ease the burden on yourself and your family. A life cover with a sum that secures all your liabilities is the way to go.

At IDFC FIRST Bank, we understand the nuances that come with making the right home loan decision. Rest assured that our teams will assist you with all your home loan requirements in a completely transparent and stress-free manner. Avail home loan interest rates as low as 6.9% p.a.* with IDFC FIRST Bank today and realise a lifelong dream without putting a foot wrong. 

 

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