Apart from your business, your home is one of your biggest investment. House hunting is exciting for home buyers but it might not be so while taking a home loan. Do a complete research on the mortgage process to understand it better as there are a lot of misconceptions and myths about it.
It is a misconception that if your credit scores is below 600 you will not get a home loan. All you need is some supporting documents that prove that you are credit worthy for a home loan. The option of having a co-signer/borrower also helps to reassure the lenders. Some of the compensating factors are a huge down payment – also called as ‘Margin Money’, Low Debt-to-Income ratios and regular and valid sources of income. Even if your credit report has some flaws, you can raise your score by making sure to make your payments on time every month and paying as far above the minimum payment as possible.
There was a time when at least 20% of the market value of the property was required to get a home loan. Many lenders in the market now offer home loan products as less as 6%. Another way of buying a home loan is by choosing a home loan insurance product. One can go for a Construction Linked Plan (CLP) home loan where the margin money is contributed at different stages of construction. This avoids lump sum pooling of all margin money at the initial/first stage of construction.
It’s a myth that the interest rate is the only factor that matters while shortlisting your home loan lender. Lenders often impose some additional costs on you which should also be considered while applying for a home loan. Most of these charges will not be refunded even if your home loan application is not approved. The charges include Processing fee (PF), Central Registry of Secularization Asset Reconstruction and Security Interest (CERSAI), Conversion Fee, late payment charges, pre-payment charges etc.
Mortgages are not similar at every bank. Depending on the age and features of the product different products and schemes are offered for mortgages. There is a scheme offered to senior citizens called ‘Reverse Mortgage Loan’ (RML). ‘Interest Saver’ is a provided to link home loan/mortgage account with the flexi current account, here the interest at the end of the day is paid according to the balance between the two. There are various mortgage schemes offered to Loan Against Property (LAP).
A specialized mortgage offer takes into account the rental income also. In the recent couple of years, as a large number of multinational companies have begun to invest and open their offices in India, the demand for commercial and rented residential housing stock has gone up substantially. To meet up with such demands and address the financial requirement of people renting properties, many of the banks have introduced Loan Against Rent Receivables (LARR). With LARR, lenders even provide loan against the expected future rentals of your property.