Complete Guide to Home Loans in India

Owning a house is a dream come true for most of us. What makes it even more memorable is knowing the loan process, eligibility for a home loan in India, tax rules, etc. 

With so many options available, navigating through even simpler questions like how to apply for the right home loan can be challenging. Therefore, we have compiled everything to know about a home loan in India to help you make an informed decision. Read on!

Types of home loans available
 

Taking a home loan in India is an excellent way for individuals to purchase or construct their dream homes. Here are the most common types of home loans available in India –

· Home purchase loan – This loan is for individuals who want to buy a new or resale home. The loan amount can be up to 80-90% of the property’s value, depending on the lender’s policies.
 

· Home construction loan – This loan is for individuals who want to construct a new home. The loan amount can cover the construction cost, and the lender disburses the loan amount in instalments based on the construction’s progress.
 

· Home improvement loan – This loan is for individuals wanting to renovate or improve their homes. The loan amount can cover the cost of repairs, painting, or any other home improvement expenses.
 

· Plot purchase loan – For buying a plot and building a new home, this loan disburses the amount in instalments according to the construction’s progress. It covers the plot’s cost and is suitable for individuals.
 

· Home extension loan – For home extensions, this loan disburses the amount in instalments based on construction progress. It covers extension costs and is available for individuals.
 

 

​​Eligibility criteria for home loans
 

The eligibility criteria for applying for a home loan in India vary from lender to lender. Here are some common eligibility criteria that borrowers need to meet to apply for a home loan –

· Age – The borrower should be at least 21 and less than 65 years when applying for a home loan.
 

· Income – The borrower’s income determines the home loan amount and eligibility. The lender may consider the borrower’s salary, business income, or other sources of income to determine eligibility.
 

· Credit score – A good credit score is essential to get a home loan in India. A credit score is a three-digit number that reflects the borrower’s creditworthiness and repayment history. A score above 750 is considered good by most lenders.
 

· Employment status – The borrower should have a stable job or a steady source of income.
 

· Property ownership – The borrower should have a clear title to the property they plan to purchase or build.
 

Applying for a home loan
 

Once the borrower meets the eligibility criteria, they can apply for a home loan by following these steps –

· Research – Research and compare the interest rates, processing fees, and other charges of different lenders. Choose a lender that offers reasonable terms and suits your requirements.
 

· Eligibility – Check your eligibility for a home loan based on your income, credit score, age, and employment history.
 

· Documentation – Collect all the necessary documents required for a home loan, including identity proof, address proof, income proof, and property-related documents.
 

· Application – Fill out the application form and provide all the necessary details. You can apply for a home loan online or visit the lender’s branch.
 

· Property evaluation – The lender will evaluate the property you plan to buy or construct. They will assess the property’s value and confirm its legal status.
 

· Loan approval – Once the lender approves your loan application, they will send you a loan offer letter with the loan amount, interest rate, and tenure. Then your loan will be disbursed.
 

Documentation required for a home loan
 

To apply for a home loan, borrowers need to submit the following documents –

· Proof of identity – Passport, voter ID card, Aadhaar card, PAN card, or driving license.
 

· Proof of address – Aadhaar Card, voter ID card, passport, utility bills, or ration card.
 

·  Income proof – Salary slips, Form 16, Income Tax Returns, bank statements, or other income-related documents.
 

· Property-related documents – Property papers, NOC from society or builder, land agreement, or sale deed.
 

· Employment proof – Employment certificate, appointment letter, or any other document for a home loan the lender requires.
 

How to increase your chances of getting a home loan approval?
 

Here are some tips to improve your chances of getting approved for a home loan –

· Maintain a good credit score – A good credit score is critical in approving a home loan. Lenders consider a credit score of 750 or above as good.
 

· Choose the right lender – Different lenders have different home loan eligibility criteria, interest rates, and loan terms. Research and compare different lenders to find the best home loan deal that suits your requirements.
 

· Provide all required documents – Providing all the required documents for a home loan accurately and on time can improve your chances of getting approved.
 

· Apply with a co-borrower – Applying for a home loan with a co-borrower with a good credit score and stable income can improve your chances of getting a home loan approved.
 

· Make a higher down payment – It can improve your chances of getting a home loan approved by reducing the loan amount and risk for the lender.
 

· Choose the right loan amount and tenure – Choosing a loan amount or tenure you cannot afford can reduce your chances of getting a home loan approved.