Everyone dreams of financial freedom, but not all can achieve it. That’s why home loans have become a critical tool for attaining the “homeowner” status for many Indians today. However, apart from the desire to own a home to escape rent burdens, another reason why people take home loans is to invest in the burgeoning Indian real estate market.
If you are considering a home loan, it’s essential to avoid loans with ridiculously high-interest rates. In fact, that should never be your first option. How can you know if the financial institution you have chosen is offering you the right interest rates? What are the processes you need to understand to qualify as the applicant that financial institutions are looking to approve for a home loan?
In this article, you’ll learn everything you need to know about the home loan application process in India.
What is a Home Loan?
Like other loans, a home loan is an amount of money given to you by banks or non-banking financial institutions (NBFCs) to buy a house, build one, renovate one, or invest in the real estate market.
Home loan deals differ among borrowers, as the amount, tenor, and interest rate offered to you are not similar. Despite the obvious differences, each home loan deal is tailored keeping in mind a specific customer’s specific needs. So, no matter the amount approved by your lender, it’s a perfect fit.
Lenders expect that you make repayments in the form of equated monthly instalments (EMIs), which comprise the principal amount and interest. You repay the loan within a period that can be as long as 30 years, so long as you qualify.
How Lenders Determine Your Eligibility for a Home Loan
Just like you consider several factors before apply for home loan, lenders are also careful not to approve loans for high-risk borrowers. Below is a list of what lenders look out for.
This is a number computed by a credit information company which is a summation of your creditworthiness. To stand a chance of getting approved, you need a convincing credit score of at least 725. Such a score demonstrates that you are a low-risk borrower, certain to repay the loan.
Not to be confused with the credit score, a credit report comprises your debt history. Lenders scrutinize your debt repayment history to see if you have defaulted on one payment or more. They do this to raise their confidence in your repayment ability.
No lender will likely offer home loans, or any loan, to unemployed applicants. Ensure that you not only have a job before applying, but the job in question must come with a salary that can cover the EMI payments. Remember that you will be paying off the loan for many years.
What Lenders Need as Paperwork for a Home Loan Application
To avoid approving home loans for unqualified applicants, lenders request that you provide certain documents. Now, note that these documents vary among lenders, so this list comprises the documents often requested. They are:
- Proof of identity
- Address Proof
- Income Proof like salary slips, dating back to 3-6 months and bank account statements
- Credit report
- Income tax returns
Eligibility Criteria for Housing Loans in India
The criteria are set based on your employment type, which could be a salary earner, a self-employed individual, or a professional like a doctor. Below are the general criteria:
- Applicants must be Indian nationals residing in India.
- Applicants need to be between a recommended age bracket. This differs among lenders.
- A certain amount of work experience is required.
Note that the criteria vary from lender to lender. Some lenders may have specific groups that they offer loans to.
How to Apply for a Home Loan in India
You can begin the application process through the following means:
Application Through the Lender’s Website (Online)
Note that the process may differ, but you should use the online EMI calculator to get to know your options. Submit the necessary details and await further instructions. Online applications are typically swift.
Application Through the Lender’s Physical Branch (Offline)
Walk into the lender’s branch closest to you and fill out the application form.
Note that you may submit some documents in person before doing payment. Payment takes up to 48 hours or more depending on the lender.