Home loans can make it possible for homebuyers to afford their dream home. Buyers only have to arrange the down payment and a lender sanctions the remaining amount needed to complete the home purchase.
The borrower repays the home loan in the form of affordable and easy-to-pay loan EMIs. Borrowers can change the loan amount and tenor to ensure they have chosen affordable EMIs.
Home loans go on for decades and if availed of without proper financial planning, their repayment can become tricky. Missing loan EMIs is not an option for a late payment not only leads to the accumulation of penalties but also diminishes one’s chances of availing of a home loan in the future.
Therefore, borrowers must borrow keeping in mind their income and repayment capacity. In this article, we talk about affordable home loans and share some tips on how to avail yourself of one.
What is an Affordable Home Loan?
An affordable home loan is simply a loan that you can comfortably repay. In other words, these are loans the EMIs of which you can easily fit into your budget. The best way to avail yourself of an affordable home loan is to borrow keeping your repayment capacity in mind.
Let us walk you through some of the simple things you can do to ensure you have an affordable home loan.
Tips on How to Avail Yourself of an Affordable Home Loan
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One of the first things that you should do to ensure you have an affordable home loan is to calculate your home loan eligibility with the eligibility calculator. This calculator lets borrowers calculate the home loan amount they can borrow based on their gross monthly income and other loan EMIs they have.
When you apply for a home loan amount you are eligible for and can comfortably repay, lenders extend you a loan on the most beneficial loan terms and conditions, including low home loan interest rates. Low home loan interest rates enhance affordability by helping one keep their loan EMIs affordable. -
With low interest rates, you can ensure the affordability of the home loan. To establish eligibility for the best home loan interest rate a bank or NBFC has to offer make sure to apply with an excellent credit score.
The ideal credit score for home loans is 750 to 900. Further, make sure to have a low debt-to-income ratio. If you wish to be approved for a home loan quickly and that too on the most beneficial loan terms and conditions, make sure that no more than 40% of your total income is going towards debt repayment. -
Opting for a low LTV ratio loan will help too. High LTV ratio loans involve high loan amounts and therefore, increase the risk for a lender.
While the LTV ratio can go as high as 85% in the case of home loans, borrowers should try and pay as high a down payment as possible and opt for a low LTV ratio loan. -
Lenders ask for several documents to verify your repayment capacity and creditworthiness. You will need to submit income, address, identity and address-proof documents.
Further, you will also need to submit property documents. Keep all these documents ready with you to experience hassle-free loan processing as well as increase your ability to negotiate for the most beneficial interest rates. -
Lastly, if you want an affordable home loan, negotiate with lenders. Talk to as many lenders as you can and negotiate with each one of them for lower interest rates. This will help you choose an affordable home loan.
