As we are in 2022, home loan interest, though it has increased by 90 basis points, is still at an all-time low, making it a good choice for the new home aspirers. While lenders are providing the lowest rate of interest, it is a commitment that extends long term. Here is a list of the top 7 parameters, beyond the cost of borrowing that you might consider before taking up a home loan – 

Be aware of the credit score – 

No matter whether you avail of a home loan from an NBFC like NAVI Home Loan, Bajaj Finserv, or Fullerton or take up a home loan from a bank like HDFC Bank, Axis Bank or SBI, having a good credit score is necessary. While NBFCS, as compared to banks, will give slightly less emphasis on your credit score, they will still check your credit score to know about your eligibility and credit risk. 

Applicants with a strong credit score of more than 750 are most likely to avail of a loan at the lowest rate of interest. So, remember to be always aware of your credit score. Ensure to conduct a thorough monthly check-up of your credit score online. In case your credit score is low, ensure to ameliorate it before you apply for a huge loan. 

Review your EMI affordability – 

As a home loan applicant, you must ensure always review your EMI affordability while selecting your loan repayment tenure and consider your monthly contributions towards important financial goals. As home loan lenders consider your fixed obligation to income ratio (FOIR) during the process of loan approval and mostly consider lending you if you have a FOIR in the range between 50 – 60 per cent (involving the EMI of the new home loan), home loan applicants must make sure to have a FOIR within this per cent range. Lower your FOIR, more your chances of getting home loan approval. 

FOIR is basically the parameter factored in by lenders to decide your home loan eligibility. Thus, try and bring your ongoing EMIs if your FOIR does not fall in this range. You can do this by either foreclosing or prepaying a few of your existing debts. 

Co – borrowers with spouses – 

The lowest rate of interest is often reserved for female borrowers. It is extremely common for home loan applicants to co-borrow with wives to get the lowest rate of interest. This has stayed the mantra for ages to rationalize your overall cost of availing a home loan owing to various reasons, which involve special concessions on its rates for the women applicants, the potential to enhance your loan proceeds eligibility with the co-applicant and the potential to claim tax benefits by every joint applicant. 

Consider a higher repayment tenure –

As home loans are a big-ticket investment and the nature of the loan is long-term, new applicants for home loans must plan out their home purchases with the best understanding of their present and future commitments while planning out their loan EMIs. With the increase in your income, consider prepaying or enhancing your EMIs to close your loan faster. 

Home loans hardly attract any prepayment charges, according to the RBI directives. Thus, if you have any additional cash, you must pay towards your principal of the loan and thus reduce your loan term. While the rate of interest on home loans is low, if you repay your home loan ahead, you may own another home or property with your free cash flows.

Go for a higher down payment – 

A higher down payment leads to a lower loan proceed, which in turn may result in lower EMI and interest constituent outgo. Opting for a higher down payment ameliorates your chances of getting loan approval, given it lowers the lender’s credit risk. 

Having said this, you should not compromise on your savings for emergency funds or financial goals to make a down payment. Doing this can propel you to borrow the loan to meet your goals at a higher interest constituent. 

Bargain hard – 

While home loan rates are increasing, they still are at their lows, and the market has a lot of attractive offers. You should compare your choices before availing of a loan. Even after availing of a home loan, you must keep a thorough watch on the rate of interest to make sure you are receiving a great deal from the lender. If not, approach your lender or transfer your loan to another for a better deal.

Now is the best time to bargain because banks are providing the schemes on both interest rates and fees to compensate for the business lost during the past 2 years due to lockdown. To avail of a good loan deal, banks even are pushing home loans tremendously forward. This is basically done to come out of the losses during the COVID times. There is even a deal of scramble amongst the lenders to get customers with a good credit history and stable income profile. Thus, to get the best home loan deal, you must ensure to have a good credit score. Having a good credit score boosts your chances of availing of a home loan, and you can negotiate with the lender for better terms and conditions. Thus, focus on your credit score before you zero on any lender for a home loan deal. 

Next, you must also consider using the NAVI Home Loan EMI Calculator or the EMI calculator of any other home loan lender to compute the EMI as per your preference and suitability. 

Avoid taking a lot of loans as well as credit cards – 

As a home loan is a commitment that stretches for the long term, you should keep a thorough watch on your liabilities so that you do not get into any kind of debt trap. Home loan applicants must always ensure to factor in the EMI of at least 6 months while making a provision for backup in the form of an emergency fund. It can assist in ensuring you have an adequate corpus to make loan repayment in the case of income loss arising owing to illness, unemployment, or disabilities. You must consider parking your exigency fund in a fixed deposit, high-yield savings bank account or short-term debt mutual funds.