Best 5 Things to Keep in Mind Before Applying for a Home Loan

Who doesn’t want to own a house of their own? Whether you’re planning to purchase your first house or want to invest in another for your future generations, you can count on a house loan for financial assistance. Because of the modern technology of today, applying for loans has become an uncomplicated process. You can fill out the application online whenever and from wherever you want to. However, maintaining a loan once you have taken it is no piece of the cake. Understanding that a loan comes with some serious accountability is important. The repayment tenure of a loan could last years. You will only be able to manage your expenses during this time if you plan well. There are a few things that you should not overlook while applying for a loan which are mentioned below.

Things to keep in mind before applying for a home loan:

1) Work on your credit score:

A good credit score will be useful to you while applying for any kind of loan. When it comes to a home loan, the amount involved is usually high. No bank or financial institution is going to lend you that money unless you have a good credit score. Maintaining a credit score a few months prior to applying for a home loan may help. If your credit score is low, fixing it takes will take time. You are therefore suggested to keep a check on your credit score and work to bring it up in case it is lower than the eligibility criteria. 

Usually, with housing loans, the minimum accepted CIBIL is 700. Your credit score is the first thing that will be considered by the lender. They are going to identify your financial credibility on the basis of this score. Hence, you need to have a score of 700 or above to be able to apply for the loan. 


2) Compare interest rates:

Interest rates are the rates charged on the repayment amount. They are added to your monthly installments. Banks earn a major chunk of profit from these interest rates. With the presence of so many banks and financial institutions in the market, you will find various plans available. These plans will come with different interest rates. It is necessary for you to look at each plan carefully and compare it with the other home loan plans that you are eyeing. 


Before you apply for a home loan, make sure that you have done enough market research and that there is no other plan out there that can offer you better interest rates. The difference may only seem a small percentage. However, since repayment tenure can last anywhere between 10 to 30 years, even the slightest change can save you thousands of rupees. Opting for the first home loan that comes your way because it seemed promising might later make you regret your choice. It is therefore important to take your time and compare the plans. 


3) Downpayments will change what your EMIs look like:

When you apply for a housing loan, it is crucial for you to strategize how you are going to pay the money back. You will be liable to pay installments to your lender every month till your repayment tenure ends. These tenures are of long duration, and even a little difference in EMIs can affect your other expenses. The higher downpayment you pay, the lesser your EMIs will become. It is advisable to plan your monthly installments as they will define what the rest of your budget looks like. 

Therefore, you should consider saving a hefty amount for your downpayment so that you do not have to pay a sizeable amount of your monthly income as EMIs. Paying a large sum as a downpayment may appear avoidable in the beginning; however, this decision will help you become debt free sooner. 

4) Don’t forget to negotiate with your lender:

When we talk about the charges applicable on the home loan, the interest rate remains one of the major ones. But is it the only kind of fee that you pay to your lender while taking a loan? No. There are additional charges that are applicable as well. Banks/ NBFCs charge loan processing fees, documentation fees, GST, etc., on your loan. There are also foreclosure penalties and late payment fines involved in case you wish to pay off the loan earlier or miss a payment. 

While it is important for you to be aware of these charges and be prepared to pay them, also make sure that you speak to your lender for any possible negotiations. Lenders sometimes consider providing a little discount on the processing fees depending upon the loan. The process fees are usually between 0.5% – 2% of the loan amount. If you are taking a loan of 20,00,000 and the processing fee is 2%, you will be liable to pay 40,000, which is not a small amount. 

5) Don’t overburden yourself:

The last and most important thing is not to bite more than you can chew. Getting an instant home loan is an easy and painless process, but managing that loan could get stressful if not done without proper planning. Always look for a loan plan that you know you will be able to handle without any stress. Plan the EMIs as per your budget. Go big on the downpayment but do not overburden yourself. Nobody else knows your budget and your savings. Make a decision based on how you will get debt free without any unnecessary strain. 



Real estate sees an all-time surge in prices, but does that mean you should refrain from buying your own house? A house loan can get you closer to your dream of owning a property. If you feel this is the right time to make this mature decision, and you will be able to get through the tenure patiently, along with managing your expenses, you should go for it. Before you begin the process of application, there are a few points that should be considered. Such as paying attention to the interest rates to compare the plans, saving for the down payment, negotiating with the lender whenever necessary, etc. 


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