Having a roof over one’s head is a cherished dream for most individuals. However, for a regular salaried individual, this dream takes years to materialise as he has to prepare to even make an application for a home loan. A home loan, as any aspiring homeowner would know requires careful research and scrutiny.
Only when you are completely sure that you have made adequate comparisons and have found a lender who is able to comprehend your needs, should you go ahead with an application. Even then, there are loopholes that you need to be wary of, as lenders may not be upfront or at the least be casual about some extra charges that may turn out to be a burden on your pocket. Here are three ways you can save yourself from paying extra bucks while taking a home loan.
Check your own credit report before making a loan application
If you are a financially conscious individual you may already be aware of the fact that your credit score and report play an important role in determining your loan eligibility. You must have a score of at least 750 and above and maintain an impeccable credit record to ensure that your loan application goes through smoothly. Once you make a loan application, the lender will make an application to CIBIL to assess your creditworthiness.
When it does it, the same will get recorded as a hard inquiry on your CIBIL report. To ensure that your CIBIL score is in order and things are perfect in your CIBIL report, pull out your CIBIL report just before making a home loan application to ensure that the lender does not make a false assessment based on your CIBIL records. In fact, you can take advantage of the facility of availing a free credit report in a year from CIBIL if you haven’t done so already.
Know how the interest rate is levied
According to RBI regulations all loans, including home loans must be linked to the marginal cost of funds based lending rate or MCLR. This is to ensure that borrowers can reap the benefits of better policy transmission or benefit from a rate cut faster as and when there is one. Home loans are usually linked to the 12-month MCLR of banks. The lenders are however free to add a markup or spread to the MCLR that is usually in the range of 0.25-0.5%. The spread may be even higher if the credit records and score of the borrower are not flattering. You, therefore, need to question the lender about the spread is arrived at before agreeing to sign on the loan documents. If you have maintained a high credit score and the check of your free credit report shows that your record is impeccable, you may even be able to wager a better deal on the spread and therefore get a loan at a lower rate of interest.
Processing fee and its waiver
Several banks are known to waive off processing fee on home loans, to enhance their home loan portfolios. In the year 2018, State Bank of India announced that the tenure of waiver on the processing fee on SBI home loan has been extended till March 31, 2018. This means other top lenders are likely to follow suit soon. Processing fees as usually charged as a percentage of the loan amount sanctioned or a minimum fixed amount. However as a customer, if you are not assured that the lender of your choice is sure to approve your loan application you may refuse to pay the processing fee upfront. There is enough anecdotal evidence of loan applications getting rejected especially in case of a resale property or the borrower choosing a project which does not bear the stamp of approval of the lender. Once again, you will be in a position to negotiate if you hold a high CIBIL score.
A lender is only willing to lend an ear when he thinks that you may turn out be a valuable customer. Therefore, whether or not you are applying for an SBI Home loan, be prepared with a stellar credit score and a blemish free report, before you make the home loan application.
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