Five Mistakes To Avoid When Applying For A Home Loan

Take extra care and ensure your safety prior to applying for a home loan advise experts.

Do I need to take out an equity loan for my home? Is this the best moment to purchase a house? Could it be an expensive financial burden? These are questions which occupy homeowners who decide to purchase an apartment. The process of getting a mortgage for a home is not always easy which can further discourage home buyers.

If you're certain that you want to buy a house and deciding to take out a mortgage there are a few common mistakes to steer clear of.

Don't apply to multiple lenders in a short period of time.Each time you make an application for credit and lenders check their credit history from the credit bureaus to determine the creditworthiness of your application. "Such credit report inquiries made by lenders are regarded as hard inquiries and will cause the credit bureaus to lower your score on credit by just a couple of points. Therefore that making direct loan requests to multiple lenders within an extremely short timeframe can decrease your credit score and which could affect your loan eligibility. Instead, go to online financial marketplaces to submit requests for loans from a vast variety of lenders. These marketplaces will also obtain your credit report in order and provide you with loans, credit report inquiries made by them are regarded as"soft enquiries" and won't affect your credit score," states Ruchika Bhagat, the managing director at a chartered accountant firm.

Make sure you assess the institution's financial performance.
There are a lot of options for buyers of homes you must make the most of them and pick the loan that best suits your needs, not the opposite. Rajas Jain, the managing director at a property agency states, "Before finalising the bank you'd like to proceed with, make sure you examine the interest rate, policies, foreclosure terms and any other conditions and terms." Mohit Ramsinghani, the chief sales officer at the real estate company advises, "One should compare various mortgage options available on the market, and then pick the one that is the most suitable for your needs. The rates of interest also differ between banks in a matter of just a few basis points in the interest rate can make a huge distinction."

Do not accept any type of loan
It is not necessary for everyone to get a mortgage for a home that lasts between 25 and 30 years. Neither should you make the term of the loan for your home too short. Consider the best tenure for you and make your decision accordingly. In explaining the necessity to tailor your loan, Ramsinghani explains, "One must choose the duration of the home loan based on the EMI budget. If you are able to manage a higher EMI then go for it (as the higher EMI implies that the loan term is shorter). This will mean that the large portion of your EMIs will be used to pay back the capital (principal loan) instead of the interest charged on the loan." Beware of the trap of basing your EMI on the basis of future earnings, warns Jain. "While considering the duration that the loan will last, you should do the calculation based on your current earnings instead of your anticipated income. Many of us make the error of thinking about an improved future, only to try to cash it in the moment," he adds.

Don't forget to set up your own emergency funds
Following the outbreak of Covid-19 Many were unable to pay their EMIs on time because they did not have the emergency funds. In addition, many chose to take advantage of the three-month moratorium, only to be informed that they'd have pay the entire amount in one payment. "The best method to plan for future uncertainty is to build an appropriate backup plan in such a fund as an emergency. This fund should amount to at minimum six times your monthly essential expenses, which includes those for loan EMIs. Therefore, when you begin planning for a home loan, you should try to double the emergency fund's amount by at minimum six times the anticipated EMI for the new credit," advises Bhagat.

Keep these 5 things in Your Mind While submitting an application for a Home Loan

• Do not take out an individual loan to pay the down payment
• Do not take out the home loan if you have a disposable income from your household is less than three months ' EMI such as it is recommended to take home loans with 20000 EMI per month only if your in-hand income per month is not less than the amount of Rs 60,000.
• Do not take the loan on your home for projects that are non RERA registered;
• Don't get a mortgage when your employment is in doubt or if your industry is in trouble;
• Don't get a loan for your home in the event of a divorce, family conflict or any other litigation that has unclear obligations.

-- Amit Goenka the MD and CEO of Nisus Finance