Home loans are a great enabler of realizing people’s dream of getting a new home. Financial institutions provide customers with the financing opportunity to move into new homes, pay the loan amount successively, and finance the purchase fully.
However, a person needs to stay aware of the common pitfalls and what one can do to find the right home loan and mortgage options and avoid compromising.
In this blog, we will examine some of the common mistakes that people must avoid when getting a loan and financing their home purchase.
Mistake 1: Applying for Home Loan Without Checking Eligibility
The first thing that a person needs to check is the eligibility. The eligibility process depends on multiple factors, and an individual needs to delve into this process before applying for a home loan from a particular financial institution.
In this step, one can check for a home loan agent who can guide a person regarding their eligibility. Based on their income, they can guide the individual to a particular lender where the chances of loan sanction approval are higher.
Solution: Before the approval process, it’s necessary to check the home loan approval through a loan calculator and see how much the person is eligible for. In this respect, a person can make a proper plan for repayment and will have the actual data, which will show how much a person is eligible for, and then they can plan accordingly.
Mistake 2: Having No Prior Plans for the Property Down payment
A down payment of a certain percentage of the home loan is required from the customer before the loan gets sanctioned. Various lenders have different down payment options, and for that, a person needs to check about the amount and then progress with the buying option.
Solution: Once you know about the minimum down payment for the loan, that person needs to check and find what the basic requirement is and start saving that amount to get the loan during the time of the requirement.
It’s important to start investing in a recurring or fixed deposit fund, which can help the person grow their money faster and have a schedule and plan for their savings. One can also look for certain government schemes that provide a one-time relaxation for first-time home buyers. Depending on those factors, one can get a home loan properly.
Mistake 3: Overstating Repayment Capacity
Now, while planning for the repayment structure, the general tendency is to overstate the repayment capacity so that one can end the debt faster. However, in certain cases, one needs to hold themselves truly accountable and only choose those options where they are comfortable paying the loan EMIs.
In many cases, people, unfortunately, bring financial distress to their families when they try to cover the loan EMI by overstating their repayment options.
Solution: Before applying for a home loan, one can create a detailed monthly budget and a list that will include all the essentials that are required each month. Here, a DSA can help to structure the budget and give a detailed plan. The DSA’s full form is Direct Selling Agent, and they are the ones who can advise the customers about the repayment procedure.
Here, a person also needs to consider the interest rate changes and the costs of penalties, which increase the total payback to the financial institution. Therefore, using a proper repayment method is needed to avoid further additional charges and also to maintain the stability of the family.
Mistake 4: Not Maintaining Credit History
A person who doesn’t maintain a good credit history faces a grave problem when they struggle to get a home loan. It can happen if the person is already leveraged and needs to finance those loans before a home loan.
Hence, it’s important to consolidate all the loan accounts to increase the chance of home loan approval and finance the home that one intends to purchase.
Solution: Here, a person needs to check their credit score often and find areas where they can curb to improve the overall score. Here, a person needs to structure their payment and make wise decisions to close the previous loans, which will improve the credit profile and thus make a person eligible for home loans.
These are some of the most important metrics one must keep in mind and avoid doing to get a smooth loan approval process.
