Buying a house is a big decision and one that requires a lot of financial planning. With the current real estate prices being so high, most homebuyers apply for home loan plans in order to get the finances they need to buy their preferred houses. However, before applying for a home loan, it is very important to first make sure that the home loan is affordable. There have been cases where borrowers have struggled with clearing their home loans, and this often leads to legal hassles as well as financial complications. This mostly happens because of poor financial planning.
To avoid these problems and clear the home loan with no financial complications, it is very important for a borrower to first consider a few checkpoints before they speak to a lender about getting a home loan. So, before taking a home loan, make sure to go through 4 of the following checkpoints to ensure financial stability:
- Down payment
A home loan does not cover the entire value of a property. Depending on the loan amount, a lender can cover up to 75%-90% of the property value. The remaining amount is supposed to be covered by the borrower. So, before applying for a home loan, keep in mind that there needs to be enough funds to clear the down payment for the property purchase.
- EMI budget
Next, an applicant needs to be sure that they would be able to clear off the monthly instalments of the home loan. For this, every applicant should make use of a home loan EMI calculator. This calculator will display the home loan EMI payments. All that the calculator needs to display the EMI payments are home loan interest rate, principal amount, and repayment tenure. Based on this result, the applicant can then decide on a suitable plan that is convenient for their budget.
- Other goals
While clearing a home loan, it is quite natural for the borrower’s biggest expense every month to be the home loan EMIs. During this time, they might not have a lot of funds for other expenses. However, it is very important to ensure that the home loan EMIs do not hamper important goals, such as having enough funds for higher studies.
- Emergency fund
Spending all the available funds and income for clearing a home loan’s monthly instalments is not ideal. It is important for every individual to have a safety corpus of funds in order to take care of any unforeseen emergency. So, before applying for the loan, make sure to have an emergency fund maintained.
Once an applicant has gone through these checkpoints, they would be in a much better position to decide on the loan amount that they can afford. This will help in avoiding any financial complications in the future. It is also advisable to make use of a home loan eligibility calculator before applying for a home loan. This calculator will display the home loan amount based on an individual’s home loan eligibility, which reduces the chances of their application getting rejected.
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