Everyone aspires to buy a house and rightly so. However, before you go out for thathome loan, it is important to indulge in a bit of self-reflection and prepare yourself. This is especially true if you are running your own business or have started one recently.
1) Find a loan that suits you – Whenever you go for a loan, do a thorough research. In almost every post I have harped on the need to conduct your own research on what type of loan will suit you, what schemes would fit your bill and which bank to approach. There are numerous banks and financial institutions that can extend a loan to you and it is important to get a clear picture. It is often seen smaller banks sometimes have the best deals and schemes, compared to bigger and more popular banks. You may also seek professional help in trying to zero in a suitable bank with the best option. What is, however, advisable is that you opt for a fixed rate of interest. While it may be on a higher side, it is always good to know how much you would be paying as EMIs when other things around you maybe fluid when starting up.
2) Do not have other debts – A home loan is often a big amount and about per lakh in loan would mean about Rs 1000 in EMI. Hence, if you want a loan of Rs. 30 lakh, it would be give-or-take around Rs. 30,000 in EMI. This is a substantial amount and it is advisable that you first clear away your existing debt before you saddle yourself with another loan. In financial parlance, get your debt-to-income ratio to a manageable level. Banks also look at this ratio to determine what would be the effect of a home loan with regards to your income.
3) A look at those credit cards – Many do not realize that credit cards are a part of debt you owe. Many go on adding credit cards to their name because a bank is offering them. However, when you are seeking a loan having multiple cards means you have a ready medium to a source of unsecured debt that can alter your debt-to-income ratio. It is good to have credit cards, but not multiple one, especially if you are not using it. What is even more important is that you settle all your credit card outstanding debts before you apply for a home loan. Banks are not comfortable with high unpaid credit card dues and more importantly, it will be an additional burden for you as a borrower.
4) Some stability – Try and achieve some level of stability in your business. It is no use piling on debt if you are fighting a battle to run your company. As ambitions soar, I often find youngsters rushing to buy a house without giving much thought. However, it is important to realize that a home loan often stretches into two decades and you need to be reasonably sure of your income stream. It is okay to not have your own house if you are not ready to buy one. Even banks like individuals who have a steady source of income and finances that show a level of certainty.