Some Do’s and Don’ts You should Remember while applying for a Home Loan

A home loan gives you the desired funds to purchase your dream house. With competitive housing loan interest rates, thanks to multiple lenders, it’s a borrower’s market. However, it’s important to keep in mind certain things while applying for a home loan to make an informed choice. In this article, we tell you certain do’s and don’ts before availing this loan.


  • Opt for a Loan that You can Afford

It’s financially prudent to opt for a home loan that you can afford and can easily repay. With competitive home loan offers, borrowers often opt for an amount that forces them to stretch their finances and compromise on other essential financial goals such as building a corpus for children’s higher education and saving for retirement.

Therefore, before applying for home loan, have a holistic view of your finances and see how much EMIs you are comfortable paying. Ideally, home loan EMIs shouldn’t be more than 20 to 25% of your monthly income.

  • Research

Home loan is a long-term commitment where you need to pay EMIs for several years at a stretch. Hence, it’s essential for you to do proper research and opt for a lender who offers you the loan at the most favourable terms and conditions.

There are several aggregator portals where you can you view offerings from potential lenders. You can read reviews, talk to experts and zero in on the offering that best suits your needs.

  • Check your Credit Score

Credit score is a three-digit score, ranging from 300-900. It reflects your credit worthiness. Before applying for a home loan, check your credit score. This is because a high score above 700, gives you the chance to negotiate with your lender on various aspects of the loan, especially the home loan interest rates. Lenders generally lower the interest rate or tweak the loan’s terms and conditions for borrowers with a high credit score.

You can check your credit score for free from the credit information companies (CICs) in India such as TransUnion CIBIL, Equifax, High Mark and Experian once in a year. Also, many third-party sites allow you to check your credit score for free by entering your name, date of birth, PAN and mobile number.


  • Opt for a Long Tenor

The tenor of the home loan has a direct bearing on the outflow of interest. Note that the longer the tenor, the greater the interest outflow and vice-versa as highlighted in the table below:

Loan amount Rate of interest Tenor Total Interest payable
Rs. 30 lakh 8% 120 months Rs.13,67,814
Rs. 30 lakh 8% 96 months Rs. 10,71,367

You can use this EMI calculator to know the interest outflow and the EMIs payable on your home loan.

  • Ignore the Fine Print

This is one of the fundamental mistakes made by most borrowers. It is essential to go through the fine print and understand the associated terms and conditions particularly the processing fee, late payment fee and foreclosure charges if any.

Since the fine print is filled with financial jargon, it’s important to take professional help if needed and understand them thoroughly. Sign on the dotted lines only after you have fully understood every statement on the loan document.

  • Hesitate in Making a Joint Application if the need be

There are instances when you may need to make a joint application while applying for a home loan. For example, if your credit score is on the lower side, a joint applicant with someone with a good score can boost the chances of availing the loan at a competitive rate of interest.

However, note that when you make a joint application, make sure your co-applicant knows every aspect of the loan and the consequences of a default.

A thorough understanding of the lending norms helps you go through the entire journey smoothly, without any hassles.