Myths & Facts that you probably didn't know about Home Loans!
Owning a home is a significant milestone everybody wants to achieve once in their life. A home brings safety and a sense of belonging, filled with emotions. A home loan can help you achieve your dream of owning a home. But various home loan myths may discourage borrowers from taking a loan. The truth and facts surrounding home loans are crucial to consider, as they will give you an idea of what you are dealing with.
Here are some common home loan myths and the facts behind them.
Myth: Choose a Home Loan that has a Low-Interest Rate
Borrowers often focus on interest rates before applying for a home loan. But other costs matter too, such as processing fees, administration fees, APR, and changes in technical valuation. Hence, it may not be prudent for a borrower to choose a home loan just because it has a lower interest rate. Borrowers should consider the loan's total cost before choosing.
Fact: The interest rate offered to the borrower may depend on several factors, including the borrower's credit score, repayment history, income, employment profile, loan size, and more. The advertised interest rate may not match the rate offered to the borrower.
Myth: Fixed Interest Rates are better than Floating Interest Rates
Borrowers assume that a fixed interest rate stays constant throughout the life of your home loan, whereas a floating interest rate fluctuates with market changes.
Fact: A floating-rate home loan becomes more economical when interest rates fall; however, your interest rate and EMI payments might increase in case of rising interest rates. A fixed-rate loan gives you a clearer picture of your payments, but the rate may be higher because of factors such as the lender and loan terms.
Myth: A Good Credit Score is all you need for securing a Home Loan
A high credit score does increase your chances of getting a home loan. But that doesn't mean it is the only factor that matters for getting your home loan approved.
Fact: Your credit score is just one of the various parameters considered by lenders while considering the application for the home loan. However, lenders consider various criteria like repayment record, other EMIs and debts, income, job stability, outstanding amounts, age, loan amount, and repayment capacity when approving a home loan and determining how much you can borrow.
Myth: Earning in Cash disqualifies you from getting a Home Loan
Many borrowers think they must have their income credited directly into their bank accounts to be eligible for a home loan.
Fact: Borrowers who earn income in cash can still be considered for a home loan, depending on the lender’s eligibility requirements and required documents. You must also prove your income source with solid documentation.
Myth: A home loan authenticates your property
Many borrowers believe that if a home loan application has been accepted by the bank for a property, it simply implies that the property is legitimate. It does not indicate the property's legal status.
Fact: A home loan and property authentication are completely different concepts. When processing a home loan, banks can run certain legal, technical, and valuation checks on the property under their own conditions. But that doesn't mean all legal issues with the property have been resolved.
Conclusion
In the blog, we debunked the biggest myths about home loans. This will put you a step ahead when you choose a home loan in the future. Clarity saves time and reduces the mental load of decision-making. This also helps you make a smarter decision once you know your options.
Lenditt’s online home loan application is a popular choice among Indians. Our home loans are designed to support our borrowers’ dream of buying their dream home with a smooth loan process.
Frequently Asked Questions
Can I apply for a home loan through a home loan app?
Some lenders and financial service providers, like Lenditt, offer home loans via an app that lets eligible applicants check requirements, enter the necessary information, and track application status.
What considerations are necessary before applying for a home loan?
Key considerations when applying for a home loan include the interest rate, fees, tenure, EMI, repayment cost, eligibility criteria, prepayment terms, and repayment capacity.
Am I eligible for a home loan if I have other loans?
Having other loans doesn’t necessarily mean you cannot get a home loan. However, the bank may consider your existing EMIs and other financial commitments when evaluating your repayment capacity and the eligible loan amount.
Is a high down payment always beneficial in a home loan?
A higher down payment reduces the loan amount, and therefore the EMI and the interest you pay.