What Is a Home Mortgage? 5 Things You Should Consider Before Opting for One

Buying a home is a momentous occasion; however, arranging for funds can be a challenging task for most homebuyers. To make it easy for people to buy their dream home, numerous private and government companies are offering home loans. These loans have a long repayment tenure and come with attractive interest rates. Home mortgages have made it relatively easy for middle-class homebuyers to buy a home of their choice. But before you avail of a home mortgage, it is imperative to understand certain things you must remember before applying for a loan.

Defining a home mortgage

In a home mortgage — more commonly referred to as a home loan — the lender provides funds to the borrower to buy a home. A home mortgage comprises a principal amount and an interest. The principal amount is the amount that the borrower has borrowed from the lender. The interest is an amount charged on the principal amount. Lenders charge a percentage as interest.

Things to consider before opting for a home mortgage

Given the numerous benefits of a home mortgage, most homebuyers are tempted to avail of a loan to buy a home of their choice. However, you need to keep a few things in mind before opting for one.

Are you eligible for a home loan?

There are many things that lenders consider before approving a home loan. And only those borrowers that meet the lender’s eligibility criteria will get a loan. The lender will check your income, job stability and whether you can repay the loan. Only if the lender is convinced that you are risk-free will they disburse the loan.

Interest rate

Every bank and NBFC levies an interest rate on the borrowed amount. Though an interest rate is a necessity as it makes it possible for a homebuyer to purchase a home, it can also significantly increase the overall cost of the loan. However, the interest rate differs from one financial institution to another. Before you apply for a loan, take your time and compare the interest rates offered by various banks and NBFCs. This will help you make an informed decision and opt for a loan that suits your budget.

Check your CIBIL score

A good credit score will help you get a loan quickly and without any hassles. Typically lenders value homebuyers whose CIBIL score is above 750. A low credit score will make it challenging for you to get a loan. So first, check your credit score, and if the figure is not impressive, take steps to improve it. Controlling credit utilisation, not taking too many loans and rectifying CIBIL mistakes, if any, are a few ways of improving your credit score. 

Choose the repayment tenure wisely 

Thirty years is the maximum period for which you can take a home loan. However, depending on your financial expenses and other considerations, you can choose a period that suits your requirements. With a long-term home loan, you will be paying EMIs for a longer duration, but they will be much more affordable. Lower EMIs will allow you to take care of your other expenses easily. On the other hand, a short-term loan will enable you to get rid of the loan within a few years. However, you will have to pay much higher EMIs. This can impact your finances and put an undue burden on you. That is why it is necessary to take your expenses and family obligations into consideration before choosing a loan repayment tenure.

Documents to be submitted

At the time of availing the loan, the lender will ask for certain documents. These include KYC documents like Aadhaar Card, passport, voter ID card or any other documentation for ID or address proof. They will also ask for your salary slips from the last three months, and property documents. So be ready with all the documentation at the time of applying for a loan.

Conclusion 

Buying a home will not be a Herculean task if you plan it well. Besides considering the above points, you need to determine your budget, estimate your financial condition, and analyse the amount of downpayment you can make. But the most important consideration is to buy the home that suits your budget. You can check the various properties on Blox, a leading real estate buying platform. The site lists more than 1,000 verified projects by some of the country’s leading developers. On this platform, you will find the projects’ location, price, amenities and other features.

Now that you have understood home mortgage and the things you need to keep in mind when availing one, your home-buying process will be a lot easier.