Debunking the Most Common Home Loan Myths

Have you been planning on buying a house? If yes, you must opt for a home loan. After taking care of the down payment, you can acquire your property and repay the remaining sum in EMIs spread across multiple years. Now, most prospective buyers believe in the below-mentioned home loan myths. Due to these myths, they fail to decide in time. Let’s get the facts straight!

1. High Credit Scores Ensure Fast Home Loan Approval

Many homeowners think that if they have high credit scores, they can secure home loan approval in no time. That’s not the case. High credit scores sure increase the chances of getting approval, but it is not the sole factor determining the eligibility. It would help if you also kept in mind your income, credit usage ratio, debt-to-income ratio, employment, age, and other financial documents. Check your lender’s eligibility criteria as well.

2. The Down Payment Includes Closing Costs

Most people worry about the down payment when applying for a home loan. It is the biggest payment you must make when purchasing a property, but it does not include the closing costs. Closing cost is the fee you need to pay while finalising a loan. Please prepare for that expense together with the down payment.

3. Fixed-Rate of Interest is Better than the Floating Rate

When applying for home loans, you find two kinds of interest rates – fixed and floating. Most people opt for a fixed interest rate because they wish to pay a fixed sum each month. They do not want to face the risks of high EMIs associated with floating rates. This is a common misconception.

Interest rates depend on the market rates. When the market rate increases, the interest rate increases along with the EMI amount. When the market rate falls, the home loan interest rate does the same. If you go for fixed interest rates, you will fail to relish the benefit of a reduced market rate.

Almost all modern-day home loan providers offer a combination of floating and fixed interest rates. Thanks to such an arrangement, the interest rate remains fixed for the first three years and then change for the rest of the term.

4. Apply for Home Loan Hurt the Credit Scores

This myth stems from the fact that credit scores decrease by a couple of points when applying for loans due to hard inquiry. But such a reduction is temporary and lasts for a brief period. If your loan is approved and you pay the instalments on time, the credit score will get back on track soon.

5. Low-Interest Rate is Best

Almost all borrowers opt for the lowest interest rate when looking for home loans. However, many factors determine the loan cost, besides the interest rate. These include late payments, processing fees, documentation charges, etc. You may have to pay more because of these additional factors even after finding the home loan with the lowest interest rate.

Go through the fine prints cautiously. Inquire about hidden charges before accepting an offer. Compare the loans instead of going for one that seems cheap.

You procure the finance you need to purchase the house you have always desired with home loans. However, you must stop believing the abovementioned myths before sending an application. Several lenders offer loans of approximately ₹ 2 Crore with a repayment term of two years at the easiest home loan eligibility. Contact for a deal that suits your budget and capacity the best.