A Guide to Borrowing a Home Loan

Buying a home of one’s own is the quintessential Indian dream. Unfortunately, with real estate prices touching the roofs, buying a home has become harder than ever, especially without external financial assistance. It is, therefore, not very surprising that the majority of Indians rely on home loans to buy a home.

The internet is brimming with home loan guides. However, most of these guides contain inadequate information and end up leaving the reader/borrower feeling confused and perplexed rather than well-informed. In this home loan guide, we attempt to cover everything that home loan borrowers must know before they begin their home loan application process.

Things to Keep in Mind While Applying for a Home Loan

Let us start with the basics. Here’s a list of things that one should keep in mind while applying for a home loan.

  • Borrow what you can easily repay. Before beginning your home loan application process, sit down and work out a repayment plan. This will help you narrow down on an EMI figure that you can easily afford, and which won’t feel burdensome in the long run.
  • Spend time on figuring out the right tenor for you. While a longer tenor will make your EMIs affordable, it will also increase your total interest out-go. Thus, when it comes to tenor, try and strike the right balance between EMIs and loan duration. Try and keep your EMIs as affordable as possible while making your tenor as short as comfortably possible.
  • Do not apply for a loan if your credit score is less than 750. With a credit score, less than that, you may be able to get loan approval, but your lender will most certainly not offer you favourable terms and conditions.
  • Before signing the home loan agreement, go through all the points mentioned in the document. Look for hidden fees and charges. If there is anything that raises red flags, get the document checked by a lawyer and sign only when you are wholly satisfied.

Now that we have the basic things out of the way, let us look at the documents you will need during the home loan process.

What are the Eligibility Criteria for a Home Loan?

The eligibility criteria for a home loan varies from lender to lender. Here we look at the generic eligibility criteria for a home loan.

  • You must be between 21 and 62 years of age
  • You must have Indian nationality.
  • You must be able to provide proof of a stable income and convince the lender that you can repay the loan you wish to take
  • If you are a salaried individual, most lenders would want you to show at least 3 years of work experience and if you are a self-employed professional, you must be able to show at least 5 years of business continuity and profitability.

These are generic eligibility criteria. Your chosen lender may have different eligibility criteria. So, go to your chosen lender’s website and check their eligibility criteria for a home loan before making an application.

What are the Documents Required While Applying for a Home Loan?

Different lenders may ask for different documents while deciding on your loan application. However, there are certain documents that almost all lenders ask for. These include:

  • A properly filled home loan application form
  • Passport-size photographs
  • Residence and identity proof documents, such as PAN Card, Aadhar, Passport, Driving License, utility bills, etc.
  • Income proof documents, such as salary slips, ITR return and your last six month’s bank statement
  • A cheque for the processing fee

Over and above this, some lenders may ask for other documents as well. If you want your home loan process to go smoothly, make sure you have all the documents ready. Doing this will expedite your loan approval.

Home Loan Application Process

Now that we have all the basic information at our disposal, let us look at the home loan application process.

  • Lenders have made it easier to apply for a home loan these days. All you have to do is go to your chosen lender’s website and make an online application by providing your personal details, such as your name, address, phone number, etc., as well as your income details, such as your monthly/annual salary.
  • If you have already decided on the property that you wish to purchase, fill in the property details in the property details column of the form.
  • Submit the form. Know that all lenders require aspiring borrowers to pay a one-time non-refundable loan application processing fee. This processing fee varies from lender to lender. Some lenders waive off this fee.
  • Once your lender has received your application, they will begin the loan approval process. This will include performing a background check and verifying all the information provided by you. This step of the home loan process usually takes 2-3 days.
  • Once the lender is satisfied that you are a risk-free borrower, they will release a home loan sanction letter containing the details of the loan offer they wish to extend to you. The sanction letter contains important information, such as the loan amount approved, interest rate offered, loan tenor, etc.
  • If you are satisfied with the terms and conditions mentioned in the loan sanction letter, send a signed acceptance copy to the lender. If you are not happy with the terms and conditions, talk to a representative and negotiate for a better offer.
  • Once you have sent in the signed home loan sanction letter, your lender will begin the disbursal process. The disbursal time also varies from lender to lender. While some lenders will disburse the loan amount within 24 hours, some lenders will take up to 2 to 3 days.

Applying for a housing loan and getting approved is quite easy if you understand the home loan application and approval process. We hope, through this guide, we have could provide you with some clarity on the whole process.

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