Home Loan: These mistakes can affect your chances of getting a home loan

With the high cost of real estate, a home loan is the only option many people have for buying their dream residence. When it comes to taking a loan, there are some common mistakes people make which can affect their chances of getting the money. Not fulfilling certain basic conditions will make it tougher for borrowers to get home loans at a favourable rate of interest, or in some cases, create difficulties in getting their application approved.

Mistakes people can avoid while opting for a home loan

Not comparing home loans from different lenders: Like everything else, adequate information is a must to get a good deal on home loans. Borrowers often do not do proper research on different conditions and interest rates being offered by lenders. This can lead them to choose terms that are not favourable for them. The key is to compare different offers and find the one best suited for your finances.

Not paying attention to credit score: Borrowers may not pay too much attention to their credit score before applying for a home loan. This can lead to them being saddled with a high rate of interest. Financial institutions always check the credit score of a borrower before finalising the application. If the score is 750 or above, a more favourable rate of interest will be provided.

Not increasing their emergency fund: Before applying for a home loan, it is vital to get one's emergency fund up and running. In normal circumstances, the fund should contain at least six months of expenses. In the case of a home loan, the fund should be doubled to ensure one is prepared for any financial emergency. Not having enough savings may make the lender unsure of your ability to pay back the money.

Not taking insurance cover: Insurance is a necessity if you are going for a home loan. It will ensure that you and your family are protected financially in case of any medical or other emergencies. Home loan insurance can also help you out in case there is a delay in repayments. Insurance cover can make your loan application seem more viable.

Overestimating repayment capacity: People generally do not take their monthly expenses into account while calculating their ability to pay equated monthly instalments (EMIs). Your EMI should not go over 30-40 per cent of your income as it could lead to difficulties in repayment. Do not be dependent on probabilities like salary hike while calculating EMI repayment capacity, but look at the current situation instead. Putting in wrong calculations will lead to the loan application being rejected.

Keeping these basic things in mind can help you get a home loan easily.