Planning to buy your dream home? Avoid these 10 common mistakes when applying for a home loan in India to increase your approval chances and save money.
Introduction
Buying a home is one of the biggest financial decisions of your life. For most people in India, this dream is only possible through a home loan. However, many applicants make mistakes during the home loan process that lead to higher interest rates, loan rejection, or even long-term financial stress.
At Wealth Crafts Solution, we’ve seen how avoiding a few simple mistakes can save customers lakhs of rupees over the loan tenure. This blog will walk you through the most common mistakes to avoid when applying for a home loan so you can secure the best deal possible.
1. Not Checking Your Credit Score Before Applying
Your credit score is one of the first things lenders check. In India, a score above 750 is considered good. If your score is low, lenders might:
- Charge you higher interest rates
- Approve a lower loan amount
- Reject your application altogether
Tip:
- Get your free credit report from CIBIL, Experian, or Equifax before applying.
- If your score is below 700, work on improving it by clearing outstanding debts, paying bills on time, and avoiding unnecessary credit card spending.
2. Ignoring Loan Eligibility Criteria
Every bank or NBFC has its own home loan eligibility requirements based on:
- Age
- Monthly income
- Employment type (salaried or self-employed)
- Existing debts
- Property type
If you apply without meeting these criteria, your chances of rejection increase.
Tip:
Use a home loan eligibility calculator before applying to know your chances.
3. Not Comparing Different Lenders
Many first-time buyers stick to their salary account bank for a loan without exploring other options. This can be a costly mistake as interest rates and charges vary widely between lenders.
Example:
A difference of 0.5% in interest rate on a ₹50 lakh loan for 20 years can cost you over ₹5 lakh extra!
Tip:
- Compare at least 5 lenders.
- Look beyond interest rates – check processing fees, prepayment charges, and loan flexibility.
4. Choosing the Wrong Loan Tenure
A short tenure means higher EMIs but less total interest paid.
A long tenure means smaller EMIs but significantly more interest in the long run.
Mistake: Many borrowers choose a long tenure just for lower EMIs, without calculating total cost.
Tip:
- Use an EMI calculator to find the sweet spot between affordability and interest savings.
5. Not Considering Fixed vs. Floating Interest Rates
- Fixed rate = EMI remains the same for the loan period.
- Floating rate = EMI changes based on RBI repo rate & market trends.
Mistake: Borrowers choose without understanding pros and cons.
- Fixed rates give stability but may be higher initially.
- Floating rates are cheaper initially but can increase later.
6. Hiding Financial Liabilities
Never hide your existing loans, credit card dues, or EMIs from your lender. Banks will verify your financial history through CIBIL, and dishonesty can lead to immediate rejection.
Tip: Always provide accurate financial details to build trust with the lender.
7. Over-Borrowing
Borrowing more than you can repay is one of the biggest mistakes. Banks may approve a higher amount based on eligibility, but that doesn’t mean you should take it.
Rule of Thumb: Your total EMIs (including other loans) should not exceed 40-45% of your monthly income.
8. Not Arranging the Down Payment in Advance
Most banks in India finance up to 75-90% of the property cost. You’ll need to arrange 10-25% as a down payment.
Mistake: Waiting until the last moment to arrange funds can delay the loan approval process.
Tip: Start saving early or arrange funds before applying for the loan.
9. Ignoring Additional Costs
Apart from the property price and loan EMIs, there are other costs such as:
- Stamp duty & registration charges
- Legal and documentation fees
- Home insurance
- Maintenance charges
Not accounting for these can strain your budget.
10. Not Reading the Loan Agreement Carefully
Many borrowers sign the loan agreement without reading all clauses, leading to unpleasant surprises later, such as:
- High prepayment penalties
- Mandatory insurance purchase
- Hidden processing fees
Tip:
Read every detail or get it checked by a financial advisor before signing.
11. Applying to Multiple Lenders Simultaneously
Each loan application triggers a hard inquiry on your credit report. Multiple hard inquiries in a short period can lower your credit score and signal to lenders that you’re credit-hungry.
Tip: Shortlist the best lenders first, then apply to one or two at most.
12. Not Getting Pre-Approved
A home loan pre-approval gives you a clear idea of your budget and strengthens your bargaining power with sellers. Many skip this step and face disappointment when their loan gets rejected after property selection.
13. Relying Solely on Brokers
While loan agents and brokers can help, relying entirely on them without doing your own research can lead to biased decisions.
Tip: Work with trusted agents (like Wealth Crafts Solution) but verify all offers yourself.
14. Delaying EMI Payments After Disbursement
Your credit history doesn’t stop mattering after loan approval. Missing EMIs can:
- Damage your credit score
- Lead to penalties
- Risk property foreclosure
Tip: Set up auto-debit to avoid missing EMIs.
Conclusion
A home loan is a long-term financial commitment, and even a small mistake can cost you lakhs over time. By avoiding the common mistakes discussed here—such as ignoring your credit score, skipping lender comparisons, and neglecting to read the agreement—you can ensure a smooth loan approval process and save money in the long run.
At Wealth Crafts Solution, we help our clients make smart financial choices by offering personalized home loan assistance with the best rates in the market.