Owning a home in India in the 21st Century with skyrocketing real estate prices isn’t an easy deal. Especially if you’re buying a property for the first time, you’ll need to be equipped with the knowledge of how a housing loan works in the present scenario. A housing loan is a financial advance that can be availed to fund a residential purchase or the construction of a residential property on a pre-owned piece of land.
Home Loan Eligibility
While availing home loans in India, the first step is to determine your eligibility. You need to fulfil the following criteria –
A lender first determines your repayment capacity from your income statements before approving a home loan. Hence, you need to have a stable source of income irrespective of salaried or self-employed individuals. This is to make sure that you’re capable enough to repay the loan amount on time. The higher your monthly disposable income; higher is the chance of getting attractive home loan offers. Usually, a financial institution considers around 50% of your disposable income as available for repayment.
- Credit Score
The lending authorities prefer a good CIBIL score of 750 or more for home loan approval. A low or poor credit score indicates your incapability of timely loan repayment and chances of defaulting.
Along with these, the applicant must be a resident of India within the age group of 25 years to 65 years. He/she must also have a minimum experience of 5 years in his present line of work.
Documents Required for Home Loan
You need to produce basic documentation including –
- Identity and address proofs
- Income statements from the past year
- Account statements from at least the last 6 months
- Income tax returns for both salaried professionals and self-employed individuals
Salaried professionals also need to produce their previous 3 months payslip. Self-employed individuals must state the proof of their business existence. They must also provide a CA audited balance sheet from the past 3 years.
How Long do Loan Approval and Disbursal Take?
Based on the eligibility criteria, a lending body decides whether to sanction your loan. Every financial institution has its own set of loan approval and disbursal time. For instance, if you avail a Home Loan from NBFCs like Bajaj Finserv, you enjoy instant approval and fast disbursal of the loan amount within 24 hours. Additionally, you enjoy benefits like minimal documentation, attractive home loan interest rates and flexible repayment tenor.
What is the Maximum Lending Amount?
Most lenders require you to pay a down payment of 20-25% of the property price. The rest 75-80%of the property value is disbursed as the loan amount. The total financed amount depends on your loan repayment capacity, credit score, and whether you have outstanding dues.
What Factors Affect your Home Loan Approval Process?
Other than your personal eligibility, factors which affect your home loan include –
- Property type
- Property’s market value
How to Apply for Home Loans?
You can apply through the online process by the following steps –
- Visit the lender’s official website
- Fill in the application form with the necessary details
- Select the loan amount
- Provide your documents and submit
It usually takes around 72 hours to get your loan approved. However, companies provide instant approval if you satisfy the eligibility criteria and provide proper documentation.
How to Calculate your Loan EMI?
You can use a home loan EMI calculator to determine the amount of your instalments and make an informed decision. You only need to add your loan amount, tenor and interest rate to calculate your EMI amount.
Buying your first property in India isn’t as challenging as most think. It is important to have an in-depth idea of why and how to opt for a home loan so that you are able to buy the best possible residential property as per your current and future finances.