How to Shop For A Home Loan

Applying for a home loan is a daunting and time-consuming process. While buying a home, however, it is almost unavoidable. Most home loan seekers assume that the best way to shop for a home loan is to approach the lender who offers the lowest rate in the market. They assume that the Rate of Interest (ROI) is the only aspect that they must be concerned about while applying for a home loan.

We agree that the cost of credit/loan solely depends on the rate of interest. However, many other aspects matter while buying a home loan.

MakaanIQ tells you what you should look for while shopping for a home loan.

• Think beyond interest rates

The rate of interest does determine your cost of credit, but this can really be an illusion because the ROI is not the only price the home loan buyer has to pay. There are other charges and fee involved too. Some of these costs will be clearly known to everybody, while some of them will be hidden. You must read the loan agreement very carefully to find out these hidden costs of credit. Crosscheck the charges listed and ask the banker to clarify wherever necessary. Shortlist the lender who gives you the best deal or the lender who waives off certain charges (under special circumstances).

• Rely on the trusted/authorised sources for information

Buying a home loan is an expensive affair. So, it is important to seek help/ information from a trusted source. Lenders do not want to lose the customers. This is why, at times, they may promise more than what they can actually deliver. Applicants/ customers who have taken a home loan/ mortgage from the same lender will prove to be the best source of information. They were once in your shoes. They will be able to tell you about their own experiences after applying for a home loan from the bank/financial institution you are interested in. Many credible websites offer reliable information too.

• Do not shy away from negotiating

Once you step inside the office of a bank or a financial institution, they would want you to be their customer. So, negotiate after emphasising on all your strong points. If your income is high and credit score is decent, if your loan repayment record is impressive, if you have saved enough and is working in a reputed organization, you can always negotiate with the lender to waive off or lower the processing fee. The odds are high that the lender will agree to your terms because he would know that there are many lenders in the market willing to offer better deals.

• Be true to yourself

Yes, you read it right. You must be true to yourself in financial matters. Nobody understands your strengths and weaknesses better than you do. Similarly, find out lenders in the market that cater to home loans under special circumstances. Many banks and financial institutions do not consider home loan cases with credit scores below 650. But many Non-Banking Financial Companies (NBFCs) do credit assessment and sanction home loans even in such cases (due to certain shortfalls like eligibility or legal/ technical issues, low credit scores etc.). NBFCs are more lenient in certain aspects when compared to banks. You must compare lenders and choose the one that suits you best.

• Know what kind of home loan you want and whether you can afford it

The market offers several home loan products, depending on the kind of property you are purchasing. To name a few, home loan for fresh property purchase, renovation, maintenance, construction, and resale. For each of these home loan products, the process, paperwork, and technical and legal analysis will be different.

If you want to switch to a new bank/lender (i.e. Balance Transfer), the home loan procedure will be different. The lending methodology for top-up loans differ. Understand your needs well and chart out the budget, keeping savings, cash flows and other expenses in your mind.