Common Mistakes to Avoid When Applying for a Home Loan
Applying for a home loan is a significant financial step, but it's easy to make mistakes along the way. To ensure a smooth and successful housing loan application process, you should steer clear of common pitfalls. This guide offers valuable tips on avoiding mistakes like neglecting your credit report, not saving enough for down payments, and not weighing interest rate options.
Steer Clear of These Common Home Loan Application Mistakes
From thoroughly reviewing loan applications and loan amounts to finalising the property deal, applying for housing loans can be challenging. Amidst the stress and the long application process, you might end up making mistakes. While securing a housing loan, you have to ensure every minute detail, from checking your credit report to reserving a down payment amount and much more.
Certain common mistakes in the home loan application process can hinder your journey towards homeownership. Therefore, to help you, here is a guide on common mistakes you should avoid when applying for a housing loan.
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What Mistakes Should You Avoid Before Applying for a Home Loan?
Here are some tips to ease your housing loan application process and avoid certain common mistakes:
1. Not Keeping a Check on Your Credit Report
Among the many qualities a lender looks for in the borrower, trust and punctuality take centre stage. Cases of housing loan approvals are higher for borrowers who can be trusted with repayments. The lenders determine this trust based on your creditworthiness. Looking at the credit score and the credit history establishes your creditworthiness. A credit score of 750 or above is usually considered a high credit score, and thus, it increases your housing loan eligibility. In contrast, a lower credit score and poor credit history can lead to rejection of the housing loan.
Therefore, when applying for a home loan, ensure checking your credit score or CIBIL score regularly. It allows you to improve your score in case it is on the lower end.
2.Not Saving Enough for Down Payments
Since real estate prices are on the rise, a housing loan offers you a little respite on the down payment. These loans usually cover 80% of the value of the property for the borrowers. However, this means that you have to cover the remaining 20% of the value of the property from your savings. The idea of a down payment is a dual benefit deal for the lenders of home loans and the borrowers. It allows you the homeownership you seek, while for the lenders, it ensures less chance of loan default as you have something to lose in case of failed repayment, i.e., your homeownership.
Therefore, when applying for a housing loan, make sure to have enough savings for a down payment. It is advisable to start saving for down payments early on to avoid loan defaults.
3.Not Weighing Interest Rate Options
One of the biggest mistakes you can make while applying for housing loans is that of negligence. Not paying attention to detail can cost you a long and stressful home loan deal. Therefore, when applying for a loan, it is recommended to make decisions promptly. You should take your time in conducting your research, gather information on the housing loan deals in the market, and compare interest rates provided by the lenders.
A low-interest rate on your housing loan can save you from unwanted stress on repayments and make pay-outs easier on your pocket and mental health. Therefore, you should weigh different housing loan deals available to get your hands on the best interest rate possible.
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4.Not Checking for Housing Loan Benefits
Homeownership is not the only silver lining of a home loan; tax benefits are also in the cards for you. Tax benefits on a housing loan offer exemption of tax up to a maximum of Rs.3.5 Lakh under Section 80C and Section 24b of the Income Tax Act. Furthermore, adding to the deal are the deductions made available through these sections of the Income Tax Act. You can also claim additional deductions up to Rs. 1.5 Lakh under Section 80EEA of the Income Tax Act, and up to Rs.50,000 under Section 80EE of the Income Tax Act.
Concluding Thoughts
A housing loan comes with layers of benefits for the borrower. From ownership of a house to tax benefits, you can enjoy it all with the right home loan rate. If you are looking for an ideal home loan, then your wait comes to an end with Tata Capital and its suitable housing loan options. Apply for homeownership with Tata Capital today!
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