The process of mortgage application is anything but simple. Quite rightly so, because the lender has to scan every aspect of your life and assess your financial health before it decides that you are mortgage worthy. Further, it’s a sizable amount to be repaid over the long term by you and the lender must know that you will be able to service your loan diligently through the tenure.
In order to judge your creditworthiness, your prospective lender will therefore ask you to submit a whole host of documents. The documentation process is rather rigorous, but you must understand that this is an important part of your loan application, so it has to be done well.
Factors to Consider
Considering every possible, decision-affecting factor, planning out everything and following it systematically is the key to a smooth, hassle-free journey to owning your dream abode.There are numerous factors that help make a better decision when selecting the
right provider for your home loan. Six of them are discussed below:
Processing and disbursal speed
Dealing with a lender that rules out the possibility of any delays and is quick in processing a home loan application always proves beneficial in the long run. Normally, if everything is in order, it takes 10-15 working days for banks to process an application.
Once approved, the lenders take additional 3-5 days for disbursing the amount of sanctioned loan.
Internal lending criteria vary from one bank to another and it is on the basis of these that a particular amount of home loan is approved for the borrower. The criteria might cover the borrower’s age, job profile (preferably salaried, because of easily understandable salary slips and ITRs), employment stability, credit history, among other aspects.
There are certain terms and conditions pertaining to repayment of the home loan imposed by banks on customers. Potential borrowers must clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, prepaying a part or full amount of home loan, and other things, before finalizing a lender.
How much should you pay?
The cost of taking a home loan would certainly vary from one bank to another. It depends upon the decision-making abilities of the borrower whether securing a home loan would prove to be an economical affair or a cost laden one.
However, there are certain things that one must weigh carefully at the cost front.
Fixed vs. floating rates
The rates vary from time to time, and as in the case of a well-planned investment portfolio, one must analyse the liability portfolio and plan on getting the maximum out of it. As a rule of thumb, if the loan period ranges between 2 to 5 years, going with a fixed interest rate is considered an ideal move. Otherwise,floating rates are considered ideal for long tenure loans.
You can even go for a hybrid loan, which enables the borrower to enjoy the best of both fixed and floating interest rates.
Hidden charges is something that tends to prick the pocket of borrowers the most.Thus, while narrowing down the options, it is advisable to compare the processing fee, down payment, valuation fees, prepayment costs and other charges levied by different lenders.