Thumb rules to consider while buying house on home loan

At this time, home loan interest rates offered by banks and other lending institutions are at a multi-year low.

With a good credit profile, one may get a home loan at an interest rate of around 7%. Considering the real estate prices have not augmented over the last few years, this could be the right time to own a home for those living on rent. But, before individual take a home loan, there are a few significant things to keep note of. The amount of loan that they are qualified to get will depend on numerous factors, comprising their current salary income etc. Also, they need to get a fix on further things like the price of the house that they are considering buying. Here are a few thumb rules to aid them, but remember these are not carved in stone and may diverge depending on an individual’s circumstances and essential.

Below gives some thumb rules to consider while buying house on home loan:

• Know the Exact Budget for Home Purchase
Deciding budget is one of the basic thumb rules which individual need to follow while going for a home purchase. For this, they need to analyses their affordability and then decide the budget. Doing this avoids future financial problems and keeps finances on track.

• Follow 35/50 Rule
While availing of a home loan, creditors ask about individual existing liabilities and financial obligations which comprises listing down their existing borrowing such as personal loan, car loan, etc. This is asked because banks normally do not lend an amount on which the EMI will be more than 45-50% of their monthly income.
However, it is always guided to take a home loan where the home loan EMI is not more than 35% of the monthly income while their total EMI counting all the loans should not be more than 50% of their total monthly income. Following this will make them feel less loaded and will also allow them to save for other goals.

• The credit score is an Important Check
A credit check is also amongst one of the most things which individual need to follow while applying for a home loan. For those who have a good credit score, it is easier to qualify for the loan while for others it becomes difficult. Banks even proposal a lower interest rate on home loans to those debtors who have a high credit score. This means having a good credit profile aids in getting a better home loan deal from banks. So, why not check this before applying for a home loan. In case individual don’t have a good CIBIL, then they should wait for a few months, take a personal loan for a small amount, start paying its EMI and after a few months when their CIBIL is good, apply for the home loan.

• Opt for a Shorter Tenure
Repaying a home loan for a longer tenure may reduce their EMI. This way individual will end up paying more on interest which can rise their total cost of borrowing. This means if they opt for a longer tenure loan to keep EMI’s low, the total interest burden will be augmented. SO, to keep interest costs low, and happy borrowing they should opt for a lower tenure for their home loan.

• Don’t Forget to Do Calculations
Not only for a home loan, doing calculations and knowing estimated EMI is a must for any loan, be it a personal loan or car loan. This is because doing calculations not only aids individual to analyses their affordability but also aids them to plan their finances accordingly. Using online EMI calculators is one of the most efficient ways to perform this.
Fine, this was all about the thumb rules which one should follow before going for a home purchase through a home loan. Following this will certainly ensure a happy borrowing and a financially secure future.

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