What are the mistakes that can ruin your home loan?

Availing a home loan is a tedious process which involves a huge sum of money. Before applying for a home loan, the applicant should do his or her research carefully and one can never be too careful. Mistakes while availing a home loan can prove to be fatal. Some of them are:

• Not having enough money to repay back the principal loan amount: This is the most fatal mistake a borrower can make when availing a home loan. The maximum loan amount that is approved by a financial institution is 80% of the total property value. While providing the loan, the financial institution will also check the CIBIL score of the applicant. Before the borrower applies for a home loan, he or she must make the down payment first. For instance, if the value of the property in question is Rs.1 crore, the maximum loan amount that can be availed by the borrower is Rs. 80 Lakh. The difference between the loan amount and the principal amount is the down payment value. The down payment amount should be deposited by the borrower at the time of availing the loan.
• Availing a loan with the principal loan amount that is not affordable: Before you apply for a home loan, consider the EMI amount that is to be paid every month. Ideally, the EMI amount should not be greater than 30 to 40% of the total monthly income of the borrower. Determining the EMI amount on a future increment is ill-advised. 
• Opting for the wrong home loan option: With so many home loan options available in the market, it is not easy to select the right home loan. Home loans are structured in different ways with some financial institutions offering floating rates, others offering semi fixed rates and overdraft benefits. It is the responsibility of the borrower to identify his or her requirements and select the home loan depending on that. Often, the applicant ends up paying more money than he or she probably should. 
• Opting for a loan with the incorrect tenure: Selecting the loan tenure is also very important for the borrower. It depends on the financial capability of the borrower. If the loaned amount can be paid back in the determined loan tenure, the borrower should opt for a short-term loan as the rate of interest is usually low. If the principal loan amount is high, it is better to opt for a long-term loan. Defaulting on EMI payment will result in fines to be paid by the borrower. 
• Not doing proper research in the market: With various websites now available for aspiring home loan applicants to check home loan, research should be done thoroughly in order to pick the best home loan option as per the requirements and financial capability of the borrower. 
• Applying for a home loan with a poor credit score: Applying for a home loan with a poor credit score will harm the applicant’s chances of getting the approval for a home loan and if the application is rejected, chances are that the credit score will go down even further. Hence, it is advisable to maintain a healthy credit score. 
• Not applying for insurance when availing a home loan: This is a common mistake made by applicants when applying for a home loan. In situations of financial distress, the applicant can use the insurance to protect himself or herself and the family as well. 
• Studying the loan agreement thoroughly: It is essential for the applicant to study the terms and conditions of the home loan carefully before signing off on the agreement. If as the applicant or the borrower, you do not agree with any terms and conditions in the agreement, it is better to dispute it with the lender.