Most people dream of owning a good house. Several financial institutions are offering home loans at attractive interest rates. However, one must understand the application process and eligibility criteria before applying for a home loan. Here’s a comprehensive guide on home loans in India to assist you in making an educated decision.
Understanding Home Loans
A home loan is the amount borrowed from a financial institution to purchase, build, or repair a house. Money is borrowed at a predetermined interest rate. Borrowers can return it over a certain tenure in EMIs (equated monthly instalments).
Many housing financing firms, banks and non-banking financing companies (NBFCs) provide housing loans. Financing is available for up to a certain value of the house’s market price. The lenders usually have a right over your house until you fully repay the home loan.
Eligibility Criteria for Home Loans
To qualify for a house loan, applicants must fulfil some requirements. While these requirements may differ amongst lenders, the following are some common eligibility factors.
- Age: Applicants should be between 18 and 70 years old. However, this varies with different lenders.
- Income: Applicants must have a stable income to repay the loan. It can be salary, a business, or other reliable source.
- Credit Score: A decent credit score is necessary. Lenders sometimes need a minimum credit score to determine creditworthiness.
- Stable Employment: Lenders favour candidates with a stable work history. They often prefer a minimum number of years in their present position.
- Co-Applicants: Lenders may allow co-applicants (such as a spouse or family member) to pool their income and apply together, enhancing eligibility.
Documents Required for Home Loan
When applying for a house loan, you must provide the relevant documents. They include the following.
Identity Proof
- Aadhar card
- Driver’s license
- Voter ID
- Passport
Address Proof
- Voter ID
- Utility bills (electricity, water, gas)
- Rental agreement
Income Proof
- Recent salary slips
- Bank statements for the last 6 months
- Income tax returns (ITR)
Property Documents
- Property title documents
- Sale agreement
Home Loan Interest Rates
Home loan interest rates depend on external benchmarks set by the RBI. As a result, interest rates might rise or fall in response to the RBI’s repo rates. The important factors influencing your home loan interest rates include the following.
- MCLR rates: The MCLR rates are regulated and maintained by the RBI. The lenders cannot offer a loan to borrowers lower than this.
- LTV ratio: The LTV Ratio is also established by the RBI. It defines the loan amount a lender can grant based on the value of the property.
- Credit score: A credit score reflects your creditworthiness. Lenders might offer cheaper rates to individuals with higher credit scores.
- Loan tenure: Interest rates are lower if the loan is for a short period. Longer loan terms may result in higher interest rates.
- Interest rates: Interest rates vary according to whether they are fixed or variable. In general, fixed-rate home loans have higher interest rates.
How to Apply for a Home Loan
Follow the steps to apply for your home loan.
- Research: First compare the interest rates and other expenses of several lenders. Choose the one that meets your needs.
- Check eligibility: Determine your eligibility for a house loan based on income, credit score, age, and work history.
- Complete the documentation: Gather all the documents, such as identity, residence, and income proof.
- Fill out the application: Complete the home loan application form. You can apply for a house loan online or at the lender’s office or online portal.
- Complete property evaluation: The lender will analyse the property you want to buy. It will determine the property’s worth and validate its legal status.
- Loan approval: The lender will approve the loan after it verifies your application and documents. Finally, the loan amount will be disbursed in a short time.
Tips to Secure a Home Loan
Here are some tips you can follow to obtain a home loan easily.
- Maintain a healthy credit score: A healthy credit score is crucial for securing a house loan. Lenders generally prefer a credit score of 750 or above.
- Select the right lender: Each lender has unique home loan eligibility, interest rates, and loan conditions. Research and compare several lenders to obtain the best home loan deal for your needs.
- Complete documentation properly: Accurate documents might increase approval chances.
- Apply with a co-borrower: Having a co-borrower with a solid credit score and good income increases your chances of approval.
- Make a larger down payment: A larger down paymentmight increase your chances of obtaining a house loan authorised by lowering the loan amount and risk to the lender.
Conclusion
Home loans are an excellent option to fund the purchase of a house. They let borrowers get significant funds to purchase a property. You can check the requirements and application process to find the right home loan for you. With the correct information and research, you can make an informed decision and get a suitable loan.