3 Basic Steps to Consider before Taking up a Home Loan (1)

3 Basic Steps to Consider before Taking up a Home Loan
Purchasing a home is a very big decision and one which should not be taken lightly. It is a longterm
commitment and there are a number of different factors, which must be kept in mind,
before applying for the same. Prior to making any formal commitment, you must be aware of
the fact that you could spend the better half of the next decade repaying this loan.
Here are a few things to keep in mind before taking up a home loan:
1. Know the maximum eligibility amount
The amount you are eligible to receive is calculated based on the annual income and the credit
history of the past. The bank must be sure that you will be in a position to repay the amount of
the loan, including what is owed in the form of interest. Thus, they take the annual income into
consideration.
This includes only the salary heads of your paycheck and not any other allowances included in
the monthly income. For example, the medical and living allowances are not taken into
consideration by the bank and this is why your calculations may not match those done by the
bank. If you have a dependable source of income and a good credit score banks could offer a
loan of up to 80% of the total cost of the house.
2. Check the CIBIL Score
The credit worthiness of an individual plays a major role in determining the amount of the loan,
as well as the rate of interest. CIBIL has come up with a system of calculating a person's score in
an easy and convenient manner. Based on the credit history like; timely payment of bills,
cheque bounces, existing loans, timely repayment of loans etc. the credit score is calculated.
This ranges form 300-900 a person with a high credit score, is more likely to receive a Property
Loan with a reasonable rate of interest. Thus, it is important to always keep a check on the CIBIL
score and take some steps to make sure that you score high in this department.
3. Loan Tenure
EMI is the amount which has to be paid towards the loan on monthly bases. The longer the
tenure of the loan, smaller will be the amount to be paid in installments. An EMI calculator can
be used to narrow in on this amount, so that you have an idea of how much will have to be set
aside, in order to avoid defaults.

Basically, there are three types of EMI calculators you must select the one that is relevant to
your offer, in this case a home loan. Based on the rate of interest offered by the bank and the
tenure over which you would like to repay the same, the EMI will be calculated.
These are the three most basic things you must keep in mind before applying for a loan. It is
important to go through the offer document and make sure that you understand the finer
details, before agreeing to anything.
[Source: http://www.sooperarticles.com/finance-articles/loans-articles/3-basic-steps-considerbefore-taking-up-home-loan-1272628.html?]