What to ask your loan officer: 5 important questions

You must ask these important questions at the time of applying for a loan to finance your dream home purchase.

A key area of purchasing a home is to raise the requisite funds for the process. With real estate costs spiralling out of control, it is inconceivable that you might have the entire corpus already set aside in your bank account. It is an indisputable fact that if you must buy a house in today’s times, you require housing finance to do so.

However, the home loan process can often be confusing and applicants can make several mistakes in applying for the loan, agreeing to the interest rates without checking for a better deal and even misunderstanding their loan eligibility. Hence, you must be armed with five important questions to ask the loan officer. These are:

1 What is my eligibility?

Sttart the process by checking your loan eligibility. If you are unsure about doing this, ask the loan officer to help you. He will study your income and credit history, and deduct such heads as Leave Travel Allowance and Medical Allowance from your net income before calculating your loan eligibility. Remember that being eligible for a home loan does not automatically mean that your loan is sanctioned.

2 What interest rate will you offer me?

All lending institutions offer comparable rates of interest on home loans. However, you might be offered a slightly lower rate of interest if you are a low risk applicant who needs immediate funding, or if the RBI cuts repo rates on housing finance. Some lending institutions also feature special offers on interest rates during peak home buying activity.

3 How does my EMI change as per interest rates?

A key element of understanding how housing finance works is knowing the correlation between the interest rate being charged and the monthly EMI you need to pay. The EMI you pay every month comprises two components: the principal amount + the interest on it. If you calculate the EMI spread over ‘x’ months of tenure with the amount payable per month, you will arrive at the total amount of money you will repay the lending institution. Thus, choosing the right rate of interest – whether fixed or variable – makes a difference to the total repayment you make.

4 Which documents do you need?

The loan officer will give you a list of documents that you must submit with your loan application. The list includes proofs of age, income, residence, and the property documents for the house that is under advisement, among others.

5 How soon can I get the loan?

Some lending institutions sanction the loan in a week but take much longer to actually disburse the funds. Others have a longer scrutiny process but the disbursal takes place within days of approving the loan. Ask your loan officer the exact time frame for scrutiny of documents, site visit and loan disbursal. Also find out the processing fees, application fees and if any foreclosure charges are levied.