Buying a home is not less than a lifetime achievement for most of us, especially, when it is our first home. Buying a home is never an easy task. The process of home buying is something which is never taught in schools. Because of the same, the Indian home buyers are lacking in the relevant knowledge which results in making many mistakes while buying a home. Every new home buyer in India must go through a lot of studies so that the mistakes on a home loan can be avoided.
Even if we try our best to learn anything and everything possible regarding a home buying and a home loan, many of us make a number of mistakes. Here are some of the most common mistakes made by first time home buyers of India.
The Most Common 11 Home Loan Mistakes
Mistake No 1
Minimum Down Payment
The down payment of a home is the amount which a home loan does not cover. A home loan covers a maximum of 80% of the project cost, the rest 20% has to be paid by the home buyer. This 20% amount is called the down payment of the home loan. The 20% is the minimum amount that has to be paid by the borrower. However one can pay as much as they want in down payment. It is advised to pay more in down payment. Higher your home loan down payment more will be the savings on interest component as the amount you have paid in down payment is free from interest payment.
Mistake No 2
Taking Loan More than One Can Handle
Everybody dreams to live in a bigger and better house. While chasing the dream, we must not overlook our financial status. Many of the new home buyers avail a loan which is bigger than their repayment capacity. In such scenarios, one may need to compromise in daily needs or in some worst cases one may default the loan.
Mistake No 3
Not Researching on Lenders
The home loan lenders are many in number at the present time. Before you apply for a home loan from any lender, you must compare loan offers of every lender so that the best offer can be chosen. Taking the first lender that you come across as the best lender is one of the biggest mistakes that a first time home buyer can do.
Mistake No 4
Not Buying the Right Loan Coverage
As we buy insurance for our home, car or health, we are to buy insurance for our home loan too. A home loan is a long-term financial responsibility. One must not take a risk by not buying insurance for the home loan. Loan insurance will protect the family of the loan borrower in case the borrower faces an unforeseen contingency, illness, death, accident or any kind of tragedy that leads to permanent disability to pay the loan EMIs.
Mistake No 5
Not Having Enough Information on the Builder
Before you make a final deal with any builder, you are to check the past records of the builder. It is better to buy a home after a year or two than buying it from an unprofessional builder. Buying a property from a wrong builder will make face difficulty in each and every step of home buying.
Mistake No 6
Signing the Contract of Sale Without Legal Advice
Taking the legal advice before signing any of the documents is a must have. One must hire a lawyer to check the property documents prior to making any final decision on any property. Many of the terms used in the property documents are the technical terms which only the experts on the same field can explain better. So it is better that we make experts of the relevant field work on it.
Mistake No 7
Selecting the Wrong Loan Product
Then we mention a home loan, it comes with many different kinds. Banks offer floating rate home loans, fixed rate loans, semi-fixed rate loans, a home loan with overdraft benefits, incremental EMI home loans and so on. Prior to applying for any of the products, one must understand the pros and cons of each product and apply for the one which is best for him.
Mistake No 8
Taking a Loan for a Long Tenure
A home loan tenure can be extended to 30 years. Longer tenure of home loan will make your EMIs smaller hence the loan burden will be lessened. But if you calculate the total outgo of the loan, you will be amazed to find that you are paying twice or thrice of the principal amount. So, if you want your loan cost to be minimized, it is better to opt for a shorter tenure. Before taking a loan check your EMI with home loan EMI calculator. So, You can plan your finance better way.
Mistake No 9
Not Checking the Eligibility
The approval on a home loan depends on the eligibility of the loan applicant. A home loan applicant has to fulfil all the eligibility criteria prescribed by the lender in order to avail a home loan. If you apply for a home loan which you are not eligible for, your application will be rejected. A rejected loan application can become the reason behind the rejection of the next loan application too. So it is advised to check the loan eligibility prior to applying for the loan.
Mistake No 10
Not Factoring All the Costs
A home buying is not just paying a certain amount of money to the builder. It comes with many additional expenses such as registration charge, stamp duty charge, brokerage (if booked through a broker), paying a fee to the lawyer, home loan processing fee etc. When you calculate the price of the property, you are to keep all those expenses into consideration.
Mistake No 11
Not Obtaining Acknowledgement for List of Original Documents Submitted
In order to avail a home loan, the original property documents are to be submitted to the lender. Once the loan is repaid in full, the lender will return you the property document and you will be the sole owner of your home. But till that time, your property documents are with the lender. At the time of submitting the documents, don’t forget to ask for an acknowledgment so that if any unprecedented happens you will have the acknowledgment to proof that your documents are with the lender.