When you decide to buy a home there are number of things that need to go in your to do check list. There are also a list of things that needs to go into your DO NOT checklist. Here is one such list for your quick reference.
Do not choose your lender first
In order to calculate whether your finances will be enough to make you eligible for a loan, most people opt to go to their lenders to do the math. Instead you can do some homework by summing your and your spouse’s annual compensation and multiply it by 4. That should give you an approximate amount of how much of loan amount you are eligible for.
Down payment calculation
Here, without any exception, all lenders require you to pay the down payment in a single installment before the property is handed over. Generally, people assume that they can pay the down payment amount proportionately while the bank finances the rest.
Avoid Window shopping
The best way you can choose the right lender is to negotiate on the basis of your credit score. Try to shortlist at 3 or 4 banks who are good enough to provide you with the required loan amount. You can also visit online market places like BankBazaar.com to get customized quotes and apply for a loan online itself!
As a prudent loan applicant, get all the information about the processing fees, legal charges, and other hidden costs before deciding on the loan amount.
Teaser loans
Do not fall for teaser loans. They generally reduce the rate of interest on your loan either for a year or for the initial years of your debt. You have to analyze when the banks shift from this reduced offer of interest rate to the floating rate, what impact will it make on your finances. For example SBI offers State Bank home loan scheme provides home loans at 8%- at least for the first year. This rate of interest, will eventually change to the floating interest after a year.
Insure your home loan!
I hope you know about this magic option. By insuring your home loan with a life insurance and a critical illness policy you can leave behind a home for your family members instead of a debt in the form of a home loan. And for the critical illness policy, if in case the borrower is not able to earn due to any critical illness say, heart stroke, kidney failure etc, this policy will provide financial assistance wherein the interest amount can be paid.