ATM :: To have a home, what not to have!

BIENU VAGHELA Chief Editor, | Mar 26, 2014, 04.59 PM IST | Source:


While discussing it out with the developer, don’t just discuss what you can afford and not what you need. Before doing that, do enough research on the projects you are interested in and whether it will suit your some particular requirement which you may have.

“It is unwise to be too sure of one’s own wisdom. It is healthy to be reminded that the strongest might weaken and the wisest might err”. – Mahatma Gandhi Taking a cue from the pearls of wisdom from Father of the nation, Mahatma Gandhi, I would begin with sharing that how much so ever wise you are as a home loan customer, you are likely to make some mistake while going in for a home loan. In this article, I would like to make home loan aspirants aware of the mistakes they can avoid in their journey of home buying process.

1. Not knowing what you want: Before taking a plunge into home buying process, you should do enough research yourself and not trust someone else’s research. If you don’t take this trouble then you then you will end up buying a property which either turns out unaffordable for you or it is not the one which you had aspired for. While discussing it out with the developer, don’t just discuss what you can afford and not what you need. Before doing that, do enough research on the projects you are interested in and whether it will suit your some particular requirement which you may have. If you are able to strike the balance between what you require and what is your budget, you get the key to a property. Needless to mention, it will leave your bank balance heavier by several lakhs.

2. Not obtaining your credit report: Before starting your negotiations with the bank or HFC, you should be ready with your credit report and check it for any discrepancies or errors or any negative entries. You should challenge it right away as it will adversely impact your credit score. It will certainly cost you dear as your negotiating power will take a beating, thus knocking off lakhs from your bank balance. But if your credit history is in great shape, then you can go a great deal with it. But if it is not, then you will certainly have difficulty in getting your home loan approved.

3. Not taking practical aspects into account: Many a times it has been noticed that we just do practical calculations, say 40-45% of your net monthly income can be dispensed as EMI without taking into account, the expenditures which may come into our way during the course of our loan as it is a long-term loan. Thus you becoming more ambitious, you tend to over borrow, more than you can afford. This way you are stretching yourself financially, inviting stress and anxiety. The pleasure of obtaining a beautiful home is overtaken by the pain of over committing to the mortgage.

4. Not doing enough research on lenders: Don’t go by advertisements in various newspapers talking about interest rates or what your friends and relatives have been offered. Do enough research on price & features comparison sites which are unbiased, transparent and accurate. Here you will get interest rates offered across many banks & HFCs along with their features like processing fee, pre-payment charges, and percentage of loan granted and documents required etc. This research will take you to the right lender and not the ones which have advertised on newspapers or television.

5. Not shopping around enough: Shop, shop & more shop…do not blindly accept the first loan offer which comes your way. Work towards getting at least one more online offer, as in an Online offer everything is more transparent and straightforward which you can compare with your offline offer. During this time put your financial house in order, getting the right numbers so that making several applications is easier which will later result into lot of savings.

6. Not disclosing facts in your loan application: It is in your interest that you disclose all information truthfully in your loan application, any manoeuvring here will cost you later. Having large credit card dues and other loans will also have a significant impact on your home loan eligibility. Lenders determine your ability to take on additional EMI burden vis-à-vis your current net income. Larger the burden, lower the loan eligibility amount. Hence you should disclose all the current liabilities to the lender.

7. Not reading your loan agreement thoroughly: Before you say: I do! Read the documents carefully as it may have some clause which will irk you later no end. Surely, you will find it frustrating to do so as you want to sink into the feeling of getting the mortgage, you don’t want your head to explode with so many terms & conditions, dos & don’ts. Reading through your mortgage documents will ensure that you know exactly what you’re getting. Otherwise, you might wake up one day to find yourself tied to a harsh mortgage plan that you accidentally agreed to. If there is a catch in the letter, this is the right time to bring it to your lender’s notice as goes the saying: No point crying over the split milk!

8. Not getting the finances in order: To avoid this mistake, open an Excel sheet and feed all the information regarding your finances like income & expenditure, assets & liabilities to know what you can really afford. This will show you your current financial status and will also give projections on your future income and liabilities. This will sort out your affordability issue as discussed earlier. The more sorted you are financially, the more better deal you will get.

9. Not taking home loan insurance cover: You want to leave “Home” for your dear ones and not the home loan in the event of your untimely death. Your family will find it difficult to fulfil this obligation then. By taking home loan insurance cover, you are insuring your loan and your loved ones future too. These policies pay for the remaining loan on the death of the borrower thus ensure that family inherits the home, not the home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to any major illness.

10. Not getting the right attitude: Indeed your lender has a big role to play in getting you the loan, but you should not be overwhelmingly grateful to them for doing the job. Many times lenders have interest at heart, and you are sometimes misunderstanding the nature of the relationship and can set you up to be taken advantage of. In fact as a borrower you should have all the power. Besides, don’t make the mistake of not checking various charges like processing fees, pre-payment charges, legal fees, valuation fees and other costs.

The crux of successful mortgage lies in the research you do and understand the different mortgages and the housing market you are considering buying into, this is the only way to place yourself into the stronger position.

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