How to Choose the Best Home Loan Lender

Owning an apartment is probably the biggest financial goal that everybody has. With the easy availability of Home Loans, the dream of buying a home is coming true for many individuals. Almost all banks and NBFCs offer Home Loans and borrowers are actually spoilt for choices when looking for lenders. However, choosing the best Home Loan deal can be a daunting task. Remember, Home Loans lock you for a period of 20-25 years and sometimes even more. A wrong decision on your part can become really costly in the long run.

Before you start searching for a home lender, it’s important to have a fair idea about the types of Home Loans available in the market and what do they have in store for you.

Home Loan - Things to Know

Property Type

Not all banks and NBFCs offer a Home Loan in the event of self-construction on a plot you own. It’s easier to get a Home Loan if you’re planning to buy a ready-to-move-in apartment, or even apartments that are undergoing construction.

Look for private banks and NBFCs, if you want Home Construction Loan.

Property Location

It’s important to consider the location of your property as not all lenders have branches everywhere. If the property you’re investing in is far away from work, try and look for a lender who has branches in both the locations.

Credit History

Before looking for a lender, take a look at your own credit score at the CIBIL website. It’ll be difficult to get your application for Home Loan approved if you have a poor credit score or history.

However, that doesn’t mean that you can’t avail a loan. Many lenders offer Home Loans to individuals with a bad credit score too but these come with a high interest rate and a higher margin requirement.

Loan Tenure

Lenders offer Home Loan for a period of 10-30 years. Keep your expenditure in mind while choosing the tenure.

EMI Affordability

Try and opt for a high EMI to lower the interest payouts. Ideally, it shouldn’t be more than 40-50% of your net salary. Also, keep in mind your long-term financial goals, and other investment options while setting the EMI amount. Use the Home Loan interest calculator and calculate the interest payouts before closing the deal.

Interest Rate

Home Loans are available under three types of interest rates—Fixed, floating, and mixed variant. In the case of a fixed rate, the interest stays the same all throughout the tenure. Floating rates are linked to the MCLR fixed by specific lenders and it keeps varying. Finally, in a mixed variant, the lending rate stays fixed for a specific period and then it becomes floating interest rate.

All these will give a fair idea on how Home Loan functions in our country. The next step will be to choose the right lender.

How to Choose a Home Loan Lender?

First time Home Loan borrowers face a lot of obstacles in choosing the best Home Loan and also choosing the right lender. Here are some tips to help pick the right lender:

Lender’s Reputation

Consider a background check for the lenders you shortlist. Home Loan frauds are not uncommon and so make sure to go for names that you’ve already heard off. Check their website and also read online reviews and testimonials.

Compare

Needless to say, there are multiple financial institutions offering Home Loans in today’s market. So, it’s crucial to do a thorough research and compare all terms and conditions offered by various banks and NBFCs. One of the most important things that you need to compare is the interest rate. Look for lenders offering lowest Home Loan interest rates.

You don’t need to visit lenders for this purpose, simply check their websites for all the details. Randomly selecting a scheme or a lender may lead to loan rejection or get you a sub-optimal loan scheme. However, this is not the only thing that matters.

Use the Home Loan Rates calculator to know how much EMI you’ll need to pay for different lenders. Compare this as well.

Loan Eligibility

Your loan eligibility depends on your net monthly income and of course on your credit score. The lower benchmark for net monthly income varies from one lender to the other and this is something you need to check at their website. If your income level is too low, you can have your working children or spouse as co-applicants to increase your chances of Home Loan approval.

Fees and Charges

All lenders charge a processing fee in order to cover all the expenses incurred while assessing your eligibility and verifying all the paperwork. Ideally, this gets deducted from the principal loan amount and the remaining is transferred to your account.

This fee ranges from 0.5-1% of your loan amount; make sure to keep this in mind. Another important thing that you need to consider is prepayment charges. Many lenders penalize you if you make prepayments—the charge levied when you make a part payment towards the outstanding balance before the due date. Many lenders charge foreclose penalty too, i.e. they charge you if you close the loan and repay the entire amount before the tenure ends. Look for lenders who don’t have such penalties.

[Source: http://www.lifehacker.co.in/jugaad/How-To-Choose-The-Best-Home-Loan-Lender/articleshow/55289541.cms]