The Home Loan is taken by an individual for the purpose of buying or constructing a house. Different banks provide Housing Loan policies with different features. However, there are certain guidelines fixed for a Home Loan procedure. Let us have a look at some of the guidelines that you should know about before applying for a loan:
Table of Contents
Eligibility for a Home Loan
Eligibility for a Home Loan implies your repayment capacity. Banks calculate your repayment capacity on the basis of your total monthly income. Banks consider 50% of your total income as the monthly repayment amount. Higher the disposable income, higher will be the loan amount you will be eligible for.
You can also estimate your eligibility with the support of a Home Loan eligibility calculator. If you are interested in USDA loan program, you can check usda loan eligibility to see if you have met the certain guidelines. If you have low to moderate income, you can still make your home ownership dream a reality by choosing to live in rural areas. USDA (U.S. Department of Agriculture) is a mortgage program that offers low interest rates with do down payment required. You can check usda loan map and enter your address to see if you are eligible for this type of loan.
Maximum Loan Amount Sanctioned by the Bank
Banks usually sanctions 80-90% of the price of the property. You have to put in the remaining 10-20% of the loan amount which is called the margin money. So, you must make sure that you put in the maximum down-payment amount so that you have to pay the minimum EMIs and interest.
Co-applicant for a Home Loan
It is mandatory to have a co-applicant while applying for a Home Loan. If you are buying a house for which you have a family member as the co-owner, then the co-owner can also be the co-applicant for the Home Loan. You can make any of your family members as the co-applicant for the loan.
Loan to Value Ratio
Loan to value ratio is the ratio of the total loan amount to the value of the house or property. The Reserve Bank of India (RBI) lets a borrower avail a loan up to 90% of the house value which is less than or equal to Rs.30 lakhs. Higher the LTV ratio, lesser will be the down-payment.
Prepayment charges are levied by a bank when you want to prepay your Home Loan amount. Floating Home Loan interest has no prepayment charges. On a fixed rate Home Loan, there is a penalty of 2% levied by banks.
MCLR is the marginal cost of funds based lending rate. Under the MCLR method, banks review and declare the MCLR rates at specific time intervals. Based on the MCLR rate, the interest rate on the loan is calculated.
The interest rate on the loan is the total of the MCLR rate and a floating rate. It is very important for you to know the calculation of the interest rate before applying for a Home Loan.
Costs involved in taking a Home Loan
Apart from the monthly EMIs and the interest payments, there are several other costs involved in taking a Home Loan. Banks charge a processing fee which is usually 1-2% of the loan amount. It helps you to compare the overall cost of a loan from different banks and then choose one accordingly.
The Bottom Line
It is important to understand the above-mentioned guidelines carefully before applying for a Home Loan. This will help you to choose a Home Loan policy as per your requirements.