Planning to apply for a New Home Loan? Or have you applied to find that you’ve been rejected? Wondering what went wrong? Avoid these common blunders to improve your chances and get the best housing loan deals.
A home loan is the easiest and the most effective tool to achieve your biggest personal dream – “Buying a new home”. However, very often borrowers get swept away with the excitement and end up committing costly mistakes, which haunt them for years to come.
A home loan is a big financial commitment, one that you’ll have to fulfil for nearly two decades or even more. So, it’s crucial that you make the right choices.
Here, in this article, you can find a list of the top home loan mistakes made by first-time borrowers as well as seasoned borrowers. Make sure to avoid these mistakes to avoid future regrets.
Mistake #1: Failing to Check CIBIL Score beforehand
One of the main reasons why financial institutions reject your home loan application is because of a poor credit score. Many borrowers are unaware of their CIBIL scores. They apply for a New Home Loan, only to find that it’s rejected due to a poor credit score.
Most lenders typically don’t sanction loans to borrowers with a score of less than 750. So, make sure that you check your score before you start the loan application process. If you find that it’s low, then take the necessary steps to boost it, to improve your chances of approval.
Mistake #2: Not Having Enough Savings for Down-payment
Lenders don’t provide you with the entire amount to purchase your home. They only provide you with 70 to 80% of the total value of the property. The rest you have to fund from your own pocket. Not many borrowers are aware of this, and they make the grave mistake of applying for a home loan when they don’t have sufficient funds for the down payment.
This forces them to choose a property that’s cheaper or wait until they can save the funds required for down payment.
To avoid this scenario, make sure to save the necessary amount for down payment before you initiate the loan application process.
Mistake #3: Not Shopping Around
Most borrowers make the mistake of just approaching the bank where they hold a savings account when it’s time to apply for a home loan. They forget that several other financial institutions offer home loans at reduced interest rates.
Always look around, check out different lenders to pick the right one who offers you the best interest rates. Remember that even a slight difference in interest rates help you save big in the long run.
Mistake #4: Providing Incomplete Documentation
One of the major reasons why home loans are rejected is that borrowers fail to provide the requisite documentation. Even a slight mismatch in spellings could lead to your loan getting rejected. So, make sure to double-check all the forms and documents when you apply for a housing loan.
Prepare all the required documents beforehand to avoid unnecessary rejection. This mistake is easily avoided when you do your homework and plan ahead.
Mistake #5: Applying at several lenders at the same time
It’s often tempting to submit loan applications to several lenders at the same time. However, this doesn’t improve your chances of approval but rather reduces it. While you must search around for the best lender, it doesn’t mean you should submit your loan application to all.
Every time you submit a loan application, a hard check is done on your credit score. When a prospective lender sees this, it gives them the wrong impression that you’re nervous for credit, thereby reducing your success rates.
While getting a home loan is easier than before, it pays to be prudent. Avoid these big blunders and avail the best home loans on your first try.