Terms You Must Consider Before Taking a Home Loan

Published: 03 Jan 2017

We all know that taking a home loan is a cumbersome task, especially for the legal formalities and the paper works. It has been noticed that most of the first-time homebuyers have faced unfamiliar situations while dealing with a home loan. There are many things to know about the process of taking a home loan. It is not as easy as it sounds.

You may come across several television, radio and newspaper advertisements, where you will find declarations like “Attractive Interest Rates on Taking Home Loans”, “Home Loans at 9.40% p.a. – EMI Rs/- 834” and so on. Most importantly there will be several loan jargons, which you will fail to understand if you are a first-time buyer. This will mostly happen when dealing with the builders and bank officials. No wonder a home loan is always considered as one of the biggest financial liabilities a borrower will ever incur.

So, before you buy an apartment near Whitefield, make sure you are aware of these common terms, which are as follows:

Sanction/Offer Letter

When you decide to buy an apartment near Whitefield, ensure that you receive a loan sanction letter from the bank. The confirmation statement on the offer letter will state that they agree to consider you as their loan customer. After this formal letter, the loan will be automatically disbursed, but after a thorough verification of the legal documents.

EMI or Equated Monthly Instalment

In a home loan, the Equated Monthly Instalment (EMI) is the payment that you need to make every month. This payment is supposed to go to the lender directly. It is a combination of your interest payments and principal repayment, which you need to pay. As per the thumb rule, the EMI must not exceed 30% of the borrower’s total income.

Credit Appraisal

Credit appraisal means a quick check on the borrower’s financial situation to find out the eligibility of the home loan and the highest loan amount to be provided. Several parameters are always considered to confirm the applicant’s credit worthiness. They are as follows:

• Applicant’s Age

• Applicant’s Income

• Nature of Possession

• Tax History

• Investments and Assets Owned

• Security of Tenure

• Recurring Liabilities

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