Process to Apply for a Home Loan
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The process that must be followed to apply for a home loan is mentioned below:
- Check Eligibility – Ensure that meet the eligibility criteria to avail a home loan. You can check on the lender’s official website about the eligibility criteria. Basic details such as your name, date of birth, employment details, income details, etc., will need to be provided to check the eligibility criteria.
- Choose the Tenure and Loan Amount – Next, the amount of loan that you are availing must be selected. The repayment tenure must be chosen as well.
- Submit the Application – Next, the completely filled out application must be submitted.
- Documents – Next, the relevant documents must be submitted.
- Loan Sanction – Once the verification process has been completed, the loan will be sanctioned. The sanction letter will be provided and the loan amount will be deposited in the bank account.
Benefits of Availing a Home Loan
Some of the main benefits of availing a home loan are mentioned below:
- Rent need not be Paid – Since the rent in many cities is high, availing a home loan will ensure that no rent needs to be paid.
- Capital Appreciation – Over time, the value of the property will increase.
- Long Repayment Tenure – Lenders may offer home loans with a repayment tenure of up to 30 years. This will ensure that the EMIs will be low.
- Easier to Buy a Home – Since the down payment is low and the remaining amount can be paid in EMIs, it is earlier to purchase a house.
- Balance Transfer – You can transfer the balance to another lender in case they offer home loans at lower interest rates.
- Prepayment Charges – No prepayment charges will be levied in the case of a home loan.
- Tax Benefits – Tax benefits can be availed in case you opt for a home loan.
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Types of Home Loans in India
Banks in India provide different types of housing finance options for various purposes. Here’s a list of the prominent types of housing loans in India based on a study of products offered by some of the top banks:
- New Home Loans – New Home Loans are offered to eligible customers looking to purchase a house or property for the first time.
- Pre-Approved Home Loan – Banks offer pre-approved home loans to eligible borrowers once their creditworthiness, income and financial position are considered considerable for an in-principal approval of the loan.
- Home Purchase Loans – Home purchase loans are given explicitly to borrowers looking to purchase a house or flat.
- Home Loan for Construction – A home loan is offered to customers looking to construct their own house on existing land.
- Plot Loans – Plot loans are offered to customers looking to purchase a piece of land or plot to construct a house.
- Home Loan Top Up – Home Loan Top Up is a facility offered by most banks and NBFCs that allows existing customers to borrow a certain amount above and over the existing home loan.
- Home Extension/Renovation Loans – Home loans for the extension or renovation of homes are offered to borrowers who wish to renovate/extend their existing house/property.
- Balance Transfer Home Loan – Individuals can use the balance transfer option to transfer their home loan from one bank to another. Most people choose this option to avail themselves of better interest rates.
- Home Conversion Loan – Suitable for those looking to purchase and move to another property when they have already bought a house with a home loan.
- Home Improvement Loan – These loans are sanctioned to those looking to repair/improve/renovate an already existing property.
- Home Loans for NRIs – These home loans cater to the housing needs of NRIs in the country. They also include PIOs and OCIs.
Home Loan Eligibility
The following is the list of eligibility criteria
| Eligibility Criteria | Requirement |
| Age | Minimum Age: 18 years and Maximum Age: 70 years |
| Resident Type | Resident IndianNon-Resident India (NRI)Person of Indian Origin (PIO) |
| Employment | SalariedSelf-employed |
| Net Annual Income | At least Rs.5-6 lakh depending on the type of employment |
| Residence | A permanent residenceA rented residence where he/she has resided for at least a year prior to applying for a loan |
| Credit score | A good credit score of at least 750 or more obtained from a recognised credit bureau |
Documents Required for Home Loan
| Identity Proof (any one) | Residence Proof (any one) | Other Documents |
| Driving License | Copy of Electricity Bill/Water Bill/Telephone Bill | Employer Identity Card |
| PAN | Copy of valid Passport/Aadhaar Card/Driving License | Duly filled loan application form affixed with 3 passport size photographs |
| Voter ID | Loan account statement for the previous 12 months if the applicant has any other ongoing loan from other banks/financial institutions | |
| Valid Passport | Bank account statements for all the bank accounts owned by the applicant for the last six months |
| Identity Proof (any one) | Residence Proof (any one) | Other Documents |
| Driving License | Copy of Electricity Bill/Water Bill/Telephone Bill | Employer Identity Card |
| PAN | Copy of valid Passport/Aadhaar Card/Driving License | Duly filled loan application form affixed with 3 passport size photographs |
| Voter ID | Loan account statement for the previous 12 months if the applicant has any other ongoing loan from other banks/financial institutions | |
| Valid Passport | Bank account statements for all the bank accounts owned by the applicant for the last six months |
Income Proof Documents
| For Self-employed Applicant/Co-applicant: | For Salaried Applicant/Co-applicant: |
| Income Tax Returns for the last 3 years | Salary Slips for the last three months |
| Certificate of Qualification (for Doctors/CA and other professionals) | Copy of Form 16 or Income Tax Returns for the last two years |
| Balance Sheet audited by a certified CA and Profit and Loss account for the previous 3 years | |
| Business License Details | |
| Business address proof | |
| TDS Certificate |
Documents Required from all Non-Resident Indians (NRIs) Applicants
| Identity Proof (any one) | Residence Proof (any one) | Other Documents |
| PAN | Telephone bill | Attested copy of the applicant’s/co-applicants’/guarantor’s valid passport and visa |
| Valid Passport | Electricity bill | Proof of residence indicating the applicant’s current overseas address |
| Driver’s License | Water bill | Employer Identity Card |
| Voter ID Card | Piped Gas bill | If the applicant is employed in the Merchant Navy, the applicant is required to submit a copy of Continuous Discharge Certificate (CDC) |
| Valid Passport | PIO Card issued by the Government of India in case the applicant/co-applicant is a Person of Indian Origin (PIO). | |
| Driving License | The completed loan application form duly filled with three passport size photographs of the applicant and co-applicants. | |
| Aadhaar Card | The attestation of the documents can be done by: 1. Indian Embassy/Consulate 2. Overseas Notary Public 3. FOs/Representative Offices 4. Officials of Branch/Sourcing Units based in India |
Income Proof Documents for NRI
| For Self-employed Applicant/Co-applicant | For Salaried Applicant/Co-applicant |
| Proof of income if the applicant/co-applicant is a self-employed professional/businessman. | Valid work permit |
| Business address proof | Employment contract (translated in English) attested by the employer/consulate/embassy/Indian foreign office if the contract is in another language. |
| Balance Sheet and Profit and Loss accounts audited by a certified CA for the last 2 years | Salary slips for the last 3 months |
| Individual Tax Return for the last 2 years – Not applicable to NRIs/PIOs located in the Middle East countries. | Bank statements indicating salary credit for the last 6 months |
| Bank statement of the individual’s as well as the business/company’s overseas account for the last 6 months. | Copy of the Identity Card issued by the current employer along with the latest salary slip (original). |
| – | Copy of the individual Tax Return for the last assessment year. – Not applicable to employees in the Merchant Navy and NRIs/PIOs located in the Middle East countries. |
Property Papers
- Agreement of Sale (any one):
- Registered Agreement of Sale
- Stamped Agreement of Sale
- Allotment Letter
- Occupancy Certificate in case the property is a ready-to-move-in property
- Copy (blueprint) of the Approved Plan and Registered Development agreement of the builder
- Conveyance Deed in case of a new property
- Bank account statements indicating all payments made to the seller or builder
Home Loan Fees and Charges
Depending on the type of loan you are applying for, the following charges may be levied:
- Processing fees – This is a one-time non-refundable fee to be paid to the home loan provider after the loan application has been approved. The processing charge varies depending on the bank and the loan scheme you are applying for.
- Prepayment charges – The Prepayment penalty is the fee you will have to pay the lender if you plan on repaying your home loan before the completion of the loan tenure.
- Conversion fees – Some banks also charge a conversion fee when you switch to a different loan scheme to lower the interest rate associated with your current scheme.
- Cheque dishonour charges – The fee is levied when the loan provider finds that a cheque issued by the borrower is dishonoured due to insufficient funds in the borrower’s account.
- Fees on account of external opinion: In some cases, you should consult an external expert, such as a lawyer or a valuator, for their opinion on the loan. This fee should be paid directly to the concerned person, not the lending institution. This fee should be paid directly to the concerned person, not the lending institution.
- Home insurance – The premium should be paid directly to the concerned company during the term to ensure the insurance policy runs during the home loan tenure.
- Default charges – Loan providers also penalise delayed repayments, i.e. if you fail to make your Equated Monthly Instalments (EMIs) or Pre-EMIs on time. The defaulting charges vary from one bank to another.
- Incidental charges – This charge covers the expenses incurred by the bank to recover dues from a borrower who has failed to make his monthly instalments on time.
- Statutory/regulatory charges – The fee includes all costs associated with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), Memorandum of Entry and Deposit, and stamp duty. You can visit CERSAI to learn more about these charges.
- Photocopy of documents – The fee is payable to the bank if you require a photocopy of your home loan documents for personal needs.
- Change in loan term – Some banks also charge a nominal fee if you wish to change the tenure associated with your loan.
Track Your Home Loan Application Status
BankBazaar helps you track your loan application easily. Simply visit application status, enter your Application ID and your mobile number, and get the status.
Before you Apply for a Home Loan
 | Check Home Loan EMI CalculatorOur EMI calculator helps you calculate the amount you have to pay the bank every month. Input your loan amount, tenure, interest rate, and processing fee to get your EMI and loan amortisation details. |
 | Current Home Loan Interest RatesInterest rates are the charges a lender will levy on you for borrowing a certain amount over a specific period. They directly impact your EMI. These rates will differ from one lender to another. |
 | Check Home Loan Processing FeesThis fee is charged by banks for processing your loan application. It is non-refundable and is charged before disbursal. It’s calculated either as a percentage of the loan amount or is a fixed amount. |
 | Check Home Loan EligibilityEach bank has specific parameters, based on which they approve a property loan for you. These include age, income, employment status, where you work, what builder you’re buying a house from, etc. |
 | Check Documents Required for Home LoanFor the housing loan to be sanctioned, you’ll have to provide your identity proof and address proof, income documents such as ITR and payslips, bank statements, and proof of house purchase. |
 | Pradhan Mantri Awas Yojana (PMAY)Pradhan Mantri Awas Yojana (PMAY) is a Government of India initiative under the government provides an interest subsidy of 6.5% on housing loans availed by the beneficiaries. |
Home Loan Rejection
| Do’s | Don’t |
| Ensure that you have researched on the loan you want to apply for | Do not blindly sign the documents before you read every term and condition on it |
| Read the fine print before taking the loan | Do not forget to compare interest rates offered by different loan providers |
| Look out for any charges applicable on prepayments and foreclosure | Do not default on your monthly payments |
| Make sure you pay the equated monthly instalments (EMIs) on time | Do not apply for a loan just for the sake of it |
| Ensure that you have a good credit score before you apply | Do not sign the home loan agreement before reading the clauses |
| Apply for a loan amount you are eligible for | Do not request for a change in tenure unless you have considered all the aspects |
| Submit all the necessary documents | Do not submit an incomplete or mismatched loan application |
| Ensure that you have stable employment | Do not have too many ongoing loans |
Tips to Improve Chances of Availing a Home Loan
Some of the tips that can be followed to improve the chances of availing a home loan are mentioned below:
- Make a Higher Down Payment – The loan amount will reduce in case the down payment is high. This will increase the chances of you getting a loan.
- Compare – It is vital that you compare different lenders before opting for one. Certain lenders may offer home loans with lower interest rates and processing fees compared to others.
- Increase the Tenure – Increasing the tenure will ensure that the EMIs will reduce. This will show the lender that the monthly instalments will be paid on time.
- Adding a Co-Borrower – Adding a co-borrower will increase the chances of you getting a loan. The combined income will be considered when the loan is provided.
- Improve Credit Score – Improving the credit score will ensure that home loans will be provided at lower interest rates. You can pay the credit card bills and EMIs on time to improve the credit score.
Fixed Rate vs. Floating Rate
Fixed Rate
Under a fixed rate loan, the interest rate will not change throughout the tenure. Therefore, you will know the EMI that must be paid every month. This can help in financial planning. However, the interest rate under such loans may be slightly higher than floating rate loans.
Floating Rate
Under a floating rate loan, the interest rate will depend on the market. Any benchmark rate change will also lead to a change in the interest rate. Interest rates on such loans are revised periodically and will depend on when the loan was disbursed.
FAQs on Home Loans
- What is a home loan? A home loan is a secured loan from a financial institution to buy a residential property. You can avail a home loan to buy a ready-to-move-in house, apartment, or one under construction. Home loans can be availed from both banks and Non-Banking Financial Companies (NBFCs).
- Which is the best bank for home loan? Before signing up for a home loan product, it’s best that you compare loans offered by different banks and lending institutions. While comparing, consider the interest rate, Loan-to-Value (LTV) ratio, processing fees, and tenure offered by the bank. Use a home loan EMI calculator and calculate your EMI based on these factors. Compare multiple home loan products by various banks by using this method. Also, certain lenders roll out home loan offers with reduced interest rates from time to time. Keep an eye on that too while looking for a loan. Also, know your requirements first before applying. You can go through the above list to get an idea regarding which bank’s home loan would suit your requirement.
- How long it takes to get a home loan sanctioned? Usually, it takes 3 to 4 weeks to get a home loan sanctioned. However, you need to keep a few factors in mind for a better understanding. First of all, you need a pre-approval of your home loan from the concerned lender to get your loan sanctioned. However, pre-approval doesn’t always mean that your loan will be disbursed immediately and depends on certain external as well internal factors. For instance, your loan sanction can be delayed if there’s delay in submission of property or income-related documents.
- Which factors determine my home loan eligibility? Banks/financial institutions consider the following factors such as your age, annual income, occupational stability, resident type, number of co-applicants, credit score, ongoing loans if any, etc.when determining your loan eligibility.
- What is the difference between a fixed-rate and a floating-rate home loan? The rate of interest associated with fixed-rate loans remains unchanged during the entire tenure of the loan. On the other hand, the interest rates applicable on floating rate loans can be revised from time to time depending on the RBI key policy rates. The equated monthly instalments can increase or decrease depending on the prevailing RBI rates in the case of floating rate type loans.
- Can I prepay my outstanding home loan amount? Yes, partial or full prepayment is possible. Floating-rate loans usually have no prepayment fee, but fixed-rate loans may incur a penalty of up to 2%.
- Can I avail tax deductions on my home loan? Yes, you can avail tax benefits on both the interest and principal component paid against your home loan. As per Section 80C of the Income Tax Act, you can avail deductions up to Rs.1.50 lakh on the principal amount repaid annually. Under Section 24 of the IT Act, taxpayers are also eligible for benefits up to Rs.2 lakh on the interest repaid against a home loan annually.
- Who can be a co-applicant? The co-applicant can be an immediate family member such as your spouse, your parents or even your major children. It is also mandatory for all co-owners of the property to be co-applicants while applying for a loan. However, the co-applicant need not be a co-owner
- What is the difference between a fixed-rate and a floating-rate home loan? The rate of interest associated with fixed-rate loans remains unchanged during the entire tenure of the loan. On the other hand, the interest rates applicable on floating rate loans can be revised from time to time depending on the RBI key policy rates. The equated monthly instalments can increase or decrease depending on the prevailing RBI rates in the case of floating rate type loans.
- Can I prepay my outstanding home loan amount? Yes, partial or full prepayment is possible. Floating-rate loans usually have no prepayment fee, but fixed-rate loans may incur a penalty of up to 2%.
- Can I avail tax deductions on my home loan? Yes you can avail tax benefits on both the interest and principal component paid against your home loan. As per Section 80C of the Income Tax Act, you can avail deductions up to Rs.1.50 lakh on the principal amount repaid annually. Under Section 24 of the IT Act, taxpayers are also eligible for benefits up to Rs.2 lakh on the interest repaid against a home loan annuall.
- Who can be a co-applicant? The co-applicant can be an immediate family member such as your spouse, your parents or even your major children. It is also mandatory for all co-owners of the property to be co-applicants while applying for a loan. However, the co-applicant need not be a co-owner.
- What is Pre-EMI? Pre-EMI is the interest paid until the entire loan amount is disbursed, after which regular EMIs, comprising principal and interest, apply.
- Can I switch from a fixed rate to a floating rate during my home loan tenure? Yes, you can switch from a fixed to floating rate of interest on your home loan during the repayment tenure. However, you will be charged a conversion fee by the lender in such cases.
- When does my loan repayment period begin? The loan repayment period begins only after the loan provider has disbursed the entire home loan amount. However, you will be required to pay the interest i.e. pre-EMI on the partially disbursed loan on a monthly basis, in most cases.
- Can I take 2 home loans at the same time? Yes, you can take 2 home loans at the same time provided that your lender approves your eligibility to manage 2 Equated Monthly Instalments (EMIs) at the same time. However, the tax benefits on the second house will be different and you will be required to establish the property as self-occupied or let-out property.
- Can I get 100% financing on a home loan? No. Banks/financial institution do not grant 100% of the property value as home loan. Home loan lenders establish a margin on their loan i.e. the percentage of the cost that the lending institution will be covering. For example, if the margin on the loan is set at 10%, the bank will cover 90% of property value. In such cases, you will be required to a make a down payment of the balance amount, i.e. 10% in order to cover for the rest of the cost.
- Does having a personal loan affect home loan eligibility? When determining your home loan eligibility, the lender makes sure that your monthly repayments are not being affected by any other ongoing loans such as personal loan, two-wheeler loan, etc. However, other ongoing loans ultimately tend to affect your eligibility as your overall spending power is reduced. If your other loan commitments exceed 50%-60% of your monthly income, your home loan application may be rejected
- Can I buy a house with two loans? No, availing two home loans for the same property is considered fraudulent and prevented by authorities.
- How do joint home loans work? A joint home loan can be availed by adding a co-applicant such as your spouse, parents, or an immediate family member on your application. Adding a co-applicant will increase your home loan eligibility as the lending institution will also be considering the co-applicant’s income and credit score when determining your loan eligibility. All co-owners of the property are required to be the co-applicant for a loan. However, the co-applicants need not necessarily be the co-owner of the concerned property.
News about Home Loan
Government employees of Haryana can avail themselves of home loan of up to Rs.25 lakh
Home loans of up to Rs.25 lakh can be availed by Haryana government employees for purchasing built-up houses or construction of a new house. The loan amount would be a maximum of Rs.15 lakh or 60% of the plot cost for purchasing a plot.11 November 2024
Household Savings Decline for Third Consecutive Year
Household savings are anticipated to have experienced a third consecutive decline in FY24, attributed to escalating liabilities stemming from housing and vehicle loans. According to the National Account Statistics 2024 data released by the Ministry of Statistics and Programme Implementation (MoSPI), net household savings plummeted by Rs. 9 lakh crore to Rs. 14.16 lakh crore over the past three years up to 2022-23. ICRA Chief Economist Aditi Nayar linked this downward trend to a significant 73% year-on-year surge in liabilities during 2022-23. While data for 2023-24 is pending release, Nayar suggested a potential reversal in the trend for 2024-25, owing to Reserve Bank of India (RBI) measures curbing unsecured personal loans. Chief Economic Advisor V Anantha Nageswaran attributed the decline to a shift in portfolio, emphasising that savings were being directed towards real assets. Households, encompassing entities beyond government or corporate sectors, have witnessed a notable decline in savings since reaching a peak of Rs. 23.29 lakh crore in 2020-21 during the second wave of the COVID-19 pandemic. Liabilities, predominantly housing, auto, personal, and other loans, have surged, with loans to households by financial corporations and NBFCs escalating four-fold to Rs. 3.33 lakh crore in 2022-23.
Union Budget 2024: Housing for Middle Class
Government to launch a scheme to help the middle-class section of India that lives in rented houses, slums, or chawls. This scheme will help the deserving middle-section of India to build their own houses.1 February 2024
Home loan offers by Banks during the festive season
Banks and housing finance companies, including SBI, HDFC Bank, and Axis Bank, present special festive home loan offers. Frequently, during festive periods, financial institutions unveil exclusive deals and reductions. Delve into the special offers, discounts, or schemes tailored by lenders for specific groups such as first-time homebuyers, women borrowers, or existing customers, as these promotions may offer extra advantages.
Courtesy To : Bankbazaar
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