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Blog
When applying for a home loan, what factors should you keep in mind?
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07 July, 2023
A home loan is a financial arrangement in which a financial institution lends money to an individual or group for the purpose of purchasing a house. The purchased house serves as collateral with the institution until the full loan amount, along with interest and associated fees, is repaid. This provides a basic explanation of a home loan.
FACTORS TO BE CONSIDERED
Some of the primary factors to be considered for a home loan are:
Entity or person (seller) :
For an entity, various factors come into play, including their market standing, brand reputation, historical performance, adherence to project schedules, the caliber of construction and materials, and more. These factors collectively influence the overall quality of the property, which subsequently impacts its price and value. Hence, they play a crucial role in deciding whether applying for a home loan is justified.
Property location (apartment complex or as applicable) :
- What is the property’s location?
- Is the project sanctioned by the government?
- Do all the required permissions exist?
- Have all taxes and fees been settled?
- Is the documentation complete?
- Are there any ownership concerns?
- Is there any legal dispute or claim on the property?
- Is the property involved in any family conflicts?
These are inquiries that should be included in the property verification process. While the financial institution handling the property documents as part of the home loan application typically addresses these and other matters, it’s valuable information for the buyer to be aware of.
Category of financial entity (lender).
- Who is providing the loan
- Is it a banking institution
- Is it a non-bankin
- financial company (NBFC)
- Is it a privately-owned lender?
- What is the regulating authority?
Type of home loan
Different financial institutions provide a range of home loan options. Banks, for instance, offer comprehensive packages that may include savings accounts, credit cards, and other financial products.
Regarding interest rates and loan duration, these entities provide loans with fixed interest rates throughout the loan term, a combination of fixed and variable interest rate periods, or even an initial interest-free period followed by variable interest rates. It’s essential to thoroughly analyze and comprehend the specific loan variant before proceeding.
Amount of home loan
Generally, the amount of the loan is calculated as a percentage of the cost of the house. It can range from 75% to 120% of the house value. The additional amount is considered for house moving, interior designing and other expenses. The percentage of the amount varies as per bank and offer amongst other factors.