Credit Score for Home Loan
A Own home is a dream of everyone of us. It is the most important financial decision one has to take in life as it involves a lot of planning, execution, and money that came from years of hard work. Since, it is the biggest purchase that you are going to make, it is important to do it wisely. East or West, a home is the best, true to this saying, no matter wherever we go, a home is the place we feel relaxed the more.
People seek home loans to buy their dream property. A home loan is a type of loan that you obtain to buy a property by offering it as collateral. You have to sign a legal document that gives the lender right to take your home, if you do not repay the loan on time. It takes a lot of time to research and find the best house that fits your tastes and even more arduous is finding the right lender that offers loan at your comfortable homes.
People seek home loans to buy their dream property. You sign a legal document that gives the lender right to take your home, if you do not repay the loan on time. You receive funds to buy your dream which you promise to repay within a certain timeframe with a certain interest. The right to the home remains in the lender’s hand until you actually repay the loan
Repaying a Home Loan
You repay the home loan in the form of equated monthly instalments (EMI) wherein the interest portion make up the monthly payment in the beginning of the EMI tenure, whereas the principal follows suit.
Interest rates
The interest rates for the home loans can be either fixed or floating. Fixed interest rates are loans where the interest rates remain constant, on the other hand the interest rates varies in the event of floating interest rates
Home Loan Application
While the process of home loan application has eased out, it is still complex than other form of loans because of the procedures involved. The first thing you ought to do before applying for home loan is to check your credit report for errors. The errors in the credit report might disqualify you from getting the loan or at times may cost you higher interest rates.
The home loan borrower has to provide a considerable amount of information some of what is required has been mentioned below:
- Personal Information – Aadhar Card, ID Card, and other details
- Bank Information – Details about the bank, past 6 months statements,
- Existing dues if any
- Salary certificate, and IT Returns
- Other information as applicable
Credit Score for Home Loan
When it comes to credit score, most lenders prefer a decent credit score. A home loan is a big commitment both for borrowers as well as lenders. The lenders wish the borrowers to have a neat credit record in order to seamlessly process the loan. Generally, having a credit score of 750 and above is recommended as they are proven to have high approval rates.
While credit score does play a vital role in determining the outcome of your home loan application, there are other parameters more important, that the bank checks in your credit report. They would want to know about the existing debt commitments. Generally, it is an unwritten rule that your debts should be less than 50% of your monthly income. Banks will look at your payments history before arriving at a decision. People with lower credit score can get home loans, but they may not be in a position to enjoy advantages like the ones with a good credit score. Keep checking your credit score periodically to be aware of your credit chances.
Conclusion
In the Indian banking landscape, a credit score is more than just a number; it’s a reflection of your financial responsibility and behaviour. When aiming to secure a home loan, a strong credit score can make all the difference. Understanding how credit scores work and taking proactive steps to maintain or improve them can put you on the path to realizing your homeownership dreams. Remember, a good credit score is not just about getting a loan; it’s about securing favourable terms that make your home loan journey smoother and more affordable.