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What is the Best Time to Apply for a Home Loan?

A home loan is the best financial source to help you buy your dream house. However, do you know the best time to apply for a home loan? Should you take it now or opt for it later? These questions are important to ask since taking a loan at the right time avoids taking a hit on your hard-earned money. Individuals who do not identify the right time before taking a home loan often face difficulties in repayment.

Several factors come together to make it the right time for a home loan application, such as interest rates, monthly income, etc. Here, we will discuss a few factors that can help you decide the right time to apply for a home loan.

Choose The Right Time To Apply For A Home Loan : Consider Factors Below

When the Interest Rates are Low

When you take a home loan, you need to repay it along with the interest rate. A higher interest rate means bigger EMIs that you may need to distribute among a longer repayment tenure. Several factors determine your interest rate, including your age, income, employment, debt to income ratio, and credit score. So, before you apply for a home loan, check if you are eligible for lower interest rates. The Repo rate also makes a difference in your loan interest rate, especially if you opt for a home loan with a fixed interest rate. Check the current repo rate and take a loan when it is on the lower side.

When You Are the Right Age

Most lenders have age-related eligibility criteria for home loan borrowers. Most lenders want you to be in your prime earning years. You must not be at the beginning of your career and not be near your retirement age. Lenders want you to pay off your loan before you retire. Therefore, check home loan eligibility online and find what age bracket your lender wants you to fall in. Age between 25 and 40 is the best age to apply for a home loan.

When You Have Good Monthly Earnings

Your monthly earnings will play an essential role in determining whether it is the right time for a home loan application or not. Home loan has hefty EMIs that will consume a significant chunk of your monthly income. So, if you are earning enough to accommodate the EMIs comfortably in your monthly budget, it’s the right time to apply for a home loan. Individuals with a high income have higher chances of availing of a home loan at lower interest rates. 

When You Have Minimal Financial Obligations

If you are already indebted with high loan EMIs and credit card bills, taking a home loan will disturb your financial management drastically. Having a debt-to-income ratio of more than 30-40% of your monthly income will only stress your finances and reduce your repayment capacity. Therefore, before you apply for a home loan, pay off other loans to reduce your DTI ratio. Reducing the DTI ratio will also improve your credit score, making you eligible for a higher loan amount at a lower interest rate.

When You Have a High Credit Score

NBFCs give utmost importance to your credit score while evaluating your loan application. Most of them require a minimum credit score of 700 or above. Credit bureaus determine your credit rating based on your credit length, repayment history, diversity of credit portfolio, credit utilization ratio, DTI ratio, and several other factors. You may use an online tool to check your credit score and ensure that you meet the lender’s minimum credit rating requirement. If you have built a high credit score, it is the right time to apply for a home loan. 

When You Have Saved Enough for a Bigger Down Payment

The lender evaluates the property’s price and offers you a percentage of its value as a loan. You have to pay the remaining amount as a down payment. The bigger the down payment you make, the less money you have to borrow. Consequently, the lower will be your loan cost and the smaller will be your EMIs. Therefore, take time to save for a bigger down payment before applying for a home loan. If you have saved at least 20-30% of your property’s worth, it’s a good time to apply for a loan with favorable terms and conditions and easy repayment.

When You Find the Right Property to Buy

People require a loan when they find the property they want to buy. So, if you find a home you want to make your own, make a repayment plan and apply for a home loan. Don’t forget to ensure that you have saved enough for a down payment and are sure of its timely repayment.

The right time to apply for a home loan is when you have minimal financial obligations and have enough income to pay your EMIs. Applying at the right time will make EMI management easier. Timely repayment will make you a homeowner soon and improve your credit score to boost your credibility for the future.

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