When it comes to purchasing a home, buyers have a variety of options. And it can be overwhelming, especially if you’re buying your first or second home. A house loan is a secured loan obtained from a bank for the purpose of purchasing a residential property.
How does a home loan work in India?
The lender will go through the required formalities when you apply for a house loan. Before deciding on characteristics such as the interest rate and the amount of your home loan, they analyse your eligibility and repayment capacity. Lenders, on the other hand, only finance 75-90 percent of the property’s cost up front, leaving you with a down payment.
However, there are a few things to consider when applying for a home loan. After all, a home loan necessitates the highest level of commitment. Here are a few pointers to make it easier for you :
Knowing the Exact Budget for your Home Purchase
One of the basic thumb rules to follow when purchasing a home is to set a budget. One must first assess the financial situation before deciding on a budget. This keeps finances on track and prevents future financial issues.
Following 35/50 Rule
It is always recommended that you take out a home loan with an EMI of no more than 35% of your monthly income, and that your total EMI, including all loans, be no more than 50% of your total monthly income. Following this plan will relieve you of stress and allow you to save for other goals.
Checking credit score
A credit check is also one the most important things which you need to follow while applying for a home loan. Banks even offer a lower interest rate on home loans to those borrowers who have a high credit score.
The process to get a home loan in India involves several steps, which before digitization of banking were complex and time-consuming for applicants. Today, online house loan procedure is not only easy but also quick. Your loan can be disbursed in just a few days.
- Application:- The first step is filling the application with details like name, phone number, pin code, type of employment, and more.
- Document collection:- There are several document in order to take the process further which includes :-
- KYC documents:- Passport, Driving Licence, Aadhaar Card, Voter ID Card (any one)
- Employee ID card
- Salary slips of the last 2 months
- Bank account statements for the last 3 months (salaried) / 6 months (self-employed)
- Document of proof of business of minimum 5 years (for businessmen/ self-employed individuals)
- Documents of the property to be mortgaged
Document processing and verification
Documents will be processed and authenticated by the lender. To confirm employment or occupation, the workplace or appropriate organisation may be contacted. To examine the CIBIL score and credit report, a credit inquiry can also be made. Only if all of the documentation is in order will the loan application go to the next stage.
One receives a sanction letter after successful completion of all the above steps. A sanction letter usually contains the following details:
- Loan amount
- Rate of interest
- Type of interest rate, fixed or variable
- Repayment tenor
A sanction letter also contains other terms, conditions, and policies of your home loan. One has to sign a copy of this letter and send it to the lender to accept their offer.
Secure fee payment
The borrower has to pay a one-time secure fee after signing the sanction letter.
Legal and technical check
The lender will perform a legal and technical check before disbursing the loan. They will send representatives to the property site for inspection of the Home Loan Balance Transfer.
Loan agreement and disbursal
The borrower will receive the final agreement after the lender has performed all their checks. Finally, the home loan amount will be disbursed as per the terms.
Currently, Home Loan interest rates are at historic lows, and anyone thinking of buying a home should capitalise on the opportunity.
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