Home loan interest rates across most lending institutions, including banks and NBFCs, are low. Even the prices of residential properties are hardly moving up. Aspiring homebuyers, however, may need to expedite buying decisions. In the post-Covid-19 era, property prices can firm up, particularly those based in locations where the demand for properties is high. Many homebuyers are firming up home-buying plans and looking to benefit from the existing low-interest home loan scenario.
If a borrower is wondering ‘How to Apply for Home Loan‘, they first need to approach a lender. A lender or lending institution can be a bank or an NBFC. The lender will calculate the loan eligibility amount that can be sanctioned based on the borrower’s profile. The home loan eligibility will determine how much loan the lender can grant. Any housing loan eligibility calculator, available on the internet, can help find the loan amount that a borrower is eligible to secure.
How to Apply for Home Loan: A Step-by-Step Approach
Home loan applications usually follow the process as below:
- Home Loan Application: A borrower will need to apply for a home loan either online or by visiting a bank branch/loan centre.
- Home Loan Sanction: After submitting the home loan application and reviewing necessary documents concerning financial stability, the bank will proceed to sanction the home loan amount.
- Home Loan Review: Once the housing loan is sanctioned, a borrower will need to submit documents on the property against which they are seeking the home loan, for both legal and technical review.
- Home Loan Approval and Disbursal: On validating the home loan amount and the property, the lender will approve and disburse the home loan.
With the appropriate documents and prompt follow-ups, a borrower can easily have their housing loan approved in less than 15 days.
Home Loan Eligibility
Lending institutions carry out a stringent process to determine the home loan eligibility of applicants. The maximum eligible amount and home loan interest rates are determined by the lender/lending institution based on the applicant’s profile, which includes employment type, income, credit history, and so on. The eligibility for a housing loan can be enhanced by following these tips:
- Add a co-applicant
- Maintain a credit score of 750+
- Repay debts on time
- Open an account with the preferred lending institution
- Declare all income sources
- Opt for a longer loan tenor
Top Three Tips to Keep in Mind When Applying for a Housing Loan in India
A home loan presents the chance of owning a property or building up an asset of one’s dreams while availing of tax benefits. A borrower, however, has to pay a percentage of the cost, up to 20%, from their funds. The home loan amount may be paid over a fixed period per the borrower’s convenience. The principal housing loan amount and the home loan interest repayment can be exempted from income tax. A housing loan application can be done at the nearest lender’s branch, a loan processing centre, or online. Here are some of the most important tips to keep in mind when applying for a housing loan in India.
Tip 1: A borrower must know how much they can afford as Equated Monthly Installments (EMIs). This is because a housing loan in India is a long-term commitment. A borrower needs to deduct all expenses, including existing loans and credit card payments from the take-home salary, to know exactly how much they can afford as EMI outgo. Typically, a lending institution allows EMIs of up to 40% of an individual’s take-home salary.
Tip 2: If a borrower applies for a higher amount, the lender might not approve of the loan. Once a borrower is aware of the amount they are going to be eligible for, they can accordingly and seamlessly plan the remaining down payment.
Tip 3: It is recommended to first-time home loan borrowers that they apply for a housing loan at a bank or lending institution they have a relationship with. For instance, they can opt for a home loan with a bank they have a salary or savings account with, have availed of a car or personal loan from, and so on. If the bank is aware of the credit history and personal details, such as employer and salary, then it has to spend less time for the Know Your Customer (KYC) processing.
The Final Word
By scouting for a lower home loan interest rate, checking eligibility on an online home loan calculator, adding a co-applicant, and choosing a longer loan tenor, a borrower can increase their chances of home loan approval. It is a good idea to be prepared with these before walking into the lending institution for a better deal at the current home loan interest rate.