5 pitfalls to avoid in the home loan application

Following are the common areas of error that you are likely to make when applying for a home loan – and how to avoid them.

As if buying a house in an escalating property market wasn’t difficult enough, you also need to navigate the home loan process carefully. Though home loans have been suitably simplified by leading housing finance companies, some parts of the process can prove to be veritable landmines. These errors can prove costly in the long run, and even result in the loan application being rejected. We list these areas of potential trouble and enumerate how you can avoid them:

1. Not having enough money at your disposal for a range of payments.

Most first-time home buyers are aware that they require some amount of money to make a down payment on the house. The down payment is normally split into two components: The token or booking amount, and the first installment on the house. But you also need to have sufficient money at your disposal to pay the following costs, which will not be paid from your home loan:

• Stamp duty costs 
• Registration fees
• Lawyers’ and broker fees
• Money to pay towards placing an advertisement in the paper asking for claimants to the property to come forward (this cost is split between the seller and buyer)
• Home loan application fees
• Lender’s evaluation and processing fees
• Stamp duty on the loan agreement
• Pre-EMI money (before the first EMI is deducted)
• Society/developer transfer fees
• Society membership fees

Find out all these costs and set aside the money accordingly – or you may come up short!

2. Not checking your loan eligibility.

Another mistake that first time home buyers make, is to proceed to make the home loan application without checking how much their home loan eligibility is. The home loan eligibility is a sum of money that you can get by way of a home loan, measured against these factors: your age, annual income, number of working years left, credit history, current debts, and city of residence. When inputting the income, leave out LTA and Medical Allowance – the lender does not count these in the final calculations.

The home loan eligibility gives you a ballpark figure for how much loan amount you can hope to get from the lending institution. Accordingly, you can streamline your search for the right properties that fit the eligibility bracket.

3. Not checking the EMI calculations.

After deciding that you wish to take a home loan from a certain lending institution, you might go ahead and make the application pronto. But wait – have you found out more about the actual numbers involved? For instance, have you found out how much your EMI outgo will be? You can use a home loan calculator to find out the projected EMI outgo, as regards the principal amount, interest charged and the tenure (in months). You can move these numbers around – you can only adjust the principal and the tenure – to arrive at a desirable EMI amount. Do note that the home loan calculator will give you the closest approximation. You can find out the final EMI payable from the lending institution.

4. Not submitting the documents correctly.

This seems like such a rookie mistake, but it happens alarmingly regularly with most loan applicants. You may get a list of the home loan documents required from the lending institution prior to sending across the completed application. When you start compiling the documents, you might realize that some of them are missing or out of date. Or the sale agreement may have some lacunae that you need to get corrected prior to submitting it to the lender. When the home loan documents required are checked by the lending institution, any incomplete or inaccurate submissions are instantly flagged. You are given some time to correct the information or submit the correct documents. But failure to do so can nix the application entirely.

5. Not choosing the right property.

Not many home loan applicants are aware that lending institutions have their own set of red flags when it comes to assessing the properties that customers require loans for. Certain localities or buildings are blacklisted for a variety of reasons, so it is always wiser to speak with the lending institution about the properties you have shortlisted before proceeding with the application. Generally, properties that are over 30 years old, or buildings which are in a bad state, or a property owner with a loan default, will not receive home loan approvals.