In order to provide financial assistance to customers to purchase a house, banks offer home loans. There are a lot of important factors that a home loan borrower needs to consider before applying for a loan.
If you are a first-time home buyer, then read this article to know more about home loans.
The exorbitant costs of real estate have made it difficult for many home buyers to purchase a house. Buying a house requires a substantial amount of money. Therefore, many people avail a home loan to purchase a house. However, every home buyer has his/her specific requirements. While some borrow a home loan to purchase a house, others borrow it to construct a home. To meet the various requirements of home buyers, banks offer different types of loans.
Types of Home Loans
- Home Purchase Loan
This is the most common type of home loan. Home purchase loans can be availed to buy a new or pre-owned house. The interest rate can be fixed or floating.
- Home Construction Loan
This loan is offered to people who want to construct their own house. The loan amount is calculated based on a rough estimate of the cost of construction. It can be disbursed in multiple instalments or in one go.
- Land Purchase Loan
A borrower can avail this loan to purchase a plot. He/she can construct a house on the purchased plot in the future.
- Home Improvement Loan
If a borrower wants to repair or renovate his/her house, then he/she can take a home improvement loan.
- Balance Transfer Home Loan
This loan can be availed by a person who wants to transfer his/her loan from one bank to another. The most common reason to transfer a loan to another bank is to repay it at a lower interest rate.
Things to Consider Before Availing a Home Loan
- Accumulate the Funds Required for the Down-Payment
In order to purchase a house, you need to pay about 10-20% of the cost of the house. Banks will not provide a loan for the entire home’s price. Therefore, before availing a home loan, make sure you have funds required to make the down-payment.
- Make Sure You Have all the Necessary Documents
You need to submit essential documents to the bank to avail a home loan. Thus, it is of utmost importance to gather all the documents before availing a loan.
- Consider Your Budget and EMI
When you take a home loan, you must repay it via EMIs. Therefore, before availing it, make sure you understand how much EMI is affordable for you. You need to ensure that the EMIs don’t affect your other monthly expenses.
- Don’t Apply to Many Banks Simultaneously
If you apply to many banks simultaneously, then it might impact your credit score. Therefore, you need to compare options from various banks. Look for banks that have pre-approved the property where you want to purchase a home. This way, your loan approval time can get reduced.
If you are a first-time home buyer, then keep these aforementioned points in mind. This way, you’ll understand the essential things about home loans.