What is a home loan? How to choose the best housing scheme?

Home is a place where a person shares the moments of joy and sorrow with their family and loved ones. It is a place where one feels safe and secured even during the toughest of times. Getting your own home is of course a biggest milestone. However, with the rising real-estate prices, it is quite challenging to buy a home with the savings alone as even a 1BHK apartment could cost up to Rs.35 to 45 lakhs. Going with the housing needs and real estate prices, several banks and financial institutions have come up with their affordable home loan schemes to bridge the gap.

What is home loan?

Basically, a home loan is a financial instrument designed for individuals those are keen to have their own living space, but are financially stable to take the big step forward. Housing finance scheme is an ideal instrument to turn your dreams into reality. It provides funding for the purchase or construction of a real-estate property.

Also to be noted that home loan is a vital financial responsibility and should be availed only when an individual is financially stable and have a good credit score as well.

Tips to sign in for housing finance:

Buying a house is a life time decision, and thus, should be made with precise alertness. Hence, zeroing down on a best home loan is important. So, here are some quick tips to help you choose the best housing finance scheme.

Good research – Getting theoretical knowledge about what is home loan is good, though it is not enough to make the decision. So, step out and do a thorough research about different housing finance schemes available in the market and go with the one that suits best to your needs.

Credit score – Credit score is probably the key to unlock lower interest rate deals. While looking for a home loan, make sure to get the credit report first to check that the score is preferably more than 700.

Income stability – Perhaps, this the most important factor to pass the loan eligibility criteria, it is significant to ensure income stability. Lenders consider applicant’s net monthly income and existing debts to calculate loan eligibility.   

Start saving early – Even though home loan is a convenient option to buy a real estate property, it is important to start saving the surplus money early. This is because even the best lender doesn’t provide 100% finance facility and thus, the borrower has to arrange at least 10-15% of the property’s cost.

Loan tenure – Choosing longer tenure can definitely help you save on monthly basis due to lower EMI cost, but overall a longer tenure will be more expensive as the interest will be computed for the longer term. Hence, it is best to opt for a shorter tenure to save a good amount of pennies in long run.