Looking to buy a home for the first time? We know that there are a thousand questions that
pop up as soon as the decision is made. For all you first time homebuyers who are looking to buy that dream home that also has all amenities and is within your budget, here are some important steps to keep in mind.
Credit score
For first time homebuyers, having a good credit score is of utmost importance as this is one of the key factors taken into account by banks when they issue loans. Obtaining your credit score is very easy. Credit bureaus like CIBIL (Credit Information Bureau of India Limited), Experian, TransUnion, and Equifax will give you a credit report if you apply online. A score between 700 and 750 is considered excellent, and a score lower than 550 will provide reason for banks to baulk before approving your loan.
Home loans and down payment
Most banks offer home loans with the requirement of a down payment. It allows banks to gain confidence in the consumer and is indicative of the consumer’s credibility, showing that he or she is serious about his or her decision. Typically, down payments are calculated on the basis of the value of the property and range from 15% to 20%. Although down payments are the norm, it is possible to avail of a loan with the offer of zero down payment if your credit score is above par. But this convenience also comes with its own risks. A loan obtained at zero down payment also means that your monthly payment amount will shoot up. It is also riskier because you can face foreclosure if you default on even one payment.
Choosing and securing your home loan
Do a thorough background research and find out which home loan suits you the best. With a plethora of options available for the choosing and with aggressive marketing by banks, it can get a bit confusing and tedious to decide what will be optimal for you. Keep a few critical factors like eligibility criteria, interest rates, turnaround times, and processing fees as your base and list of the most trusted lenders. Mortgage interest rates fixed or floating, apart from your income, should be one of the key deciders in choosing a lender.
An additional step that a lot of banks don’t stress on but is nevertheless important to you is getting insurance for your loan. A home loan protection plan is an insurance plan that will ensure payment to the bank in case the borrower passes away. In this event, the borrower’s family is saved from legal and monetary hassles and will also not have to vacate the house due to non-payment of the loan.
