Do's and Don'ts before applying for a home loan - Home Loan Stories

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07 JUNE, 2021

Buying a house has become an expensive affair due to the enormous price hike in the real estate industry. But, with the help of a home loan, you can easily gather funds for purchasing your dream house. Nowadays, you can easily apply for a home loan online at the ease of your fingertips. However, before applying for a home loan, ensure to make a note of the do’s and don’ts mentioned below:

Do’s

Check the eligibility criteria
The eligibility criteria for a home loan may vary from one lender to another. Most lenders have simple eligibility criteria and a simplified documentation process. You must visit the lender’s official website and check your home loan eligibility by using the online home loan eligibility calculator. Apply for a home loan only if you meet the eligibility criteria, or else your loan application may be rejected. The basic eligibility criteria for availing a home loan with Kotak Mahindra Bank are mentioned below:
- Salaried applicants should be between 18 and 60 years old
- Self-employed applicants should be between 18 and 65 years old
- For self-employed applicants, the business should be in existence for at least 3 years

Choose the loan amount wisely
Evaluate your financial position and choose your home loan amount accordingly. Do not over-borrow as it can increase your repayment burden. Also, try to make a higher down payment while availing a home loan. The smaller your home loan amount, the lesser will be your monthly instalments.
Make a note of the interest rate and other charges
Before applying for a home loan with a lender, ensure to make a note of the interest rate, processing fee, prepayment charges, late payment penalties, etc. All these charges associated with a home loan play a crucial role in determining the overall cost of borrowing. Also, read the terms and conditions of the home loan agreement carefully.
Check your credit profile
Lenders are likely to check your credit score before processing your home loan application. A good credit score of 750 or above will not only boost your home loan eligibility but also help you obtain a loan with favourable terms. Therefore, make sure that you check your credit score before applying for a home loan. In case you have a low credit score, you must take the necessary measures to improve it. You can boost your credit score gradually by clearing the outstanding debt, decreasing your credit utilization ratio, and having the right credit mix.

Don’ts

Do not opt for a longer tenure
While it’s true that a longer tenure will reduce your EMIs, you would end up spending a significantly higher amount towards the interest pay-out. To avoid this, you should opt for a shorter home loan tenure. You can make use of the home loan EMI calculator to know the total interest outgo and the EMIs payable on your home loan.
Do not hesitate to add a co-applicant, if needed
You can enhance your home loan eligibility by adding a salaried or self-employed family member as a co-applicant. However, if you apply for a joint home loan, make sure that the co-applicant is well aware of every aspect of the loan as well as the consequences of a default.
Don’t choose a lender only on the basis of interest rate
While it’s true that a competitive home loan interest rate can reduce your overall cost of borrowing, you must also check other charges such as processing and conversion fee, prepayment charges, late payment penalty, etc. before choosing a lender. Also, don’t forget to make a note of expenses like stamp duty and registration charges as these can increase the cost of purchase by a few lakhs.
Don’t make a major purchase before applying for a home loan
Try to keep your expenses to a bare minimum before applying for a home loan. Avoid making big purchases as it can affect your financial corpus for a down payment. Making major purchases such as a vehicle, mobile phone, or home appliances on EMI can affect your credit score, and consequently, availing a home loan can become challenging.

A thorough understanding of all these do’s and don’ts can make the process of availing a home loan simple. In case of any queries, feel free to seek the help of a financial expert. So, why wait? Apply for a home loan today and get assistance in making your home buying journey a hassle free one, with Kotak Mahindra Bank!

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Do’s and Don'ts Before Applying for a home Loan

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