Knowing all about home loans is key factor before buying a house as it’ll be a life rewarding long-term investment. Being eligible for home loan involves many factors and getting the expected the amount after down payment can be a harrowing task for anyone.
When I bought my first home few years back, It was a big step for me as I was investing all my savings and didn’t know what option to choose from. In this situation, once I made a down payment and made the booking, next step was to get a right loan and needed to learn about home loans.
There were many queries in my mind before applying for many banks and whether I would be eligible or not, how basic home loan works. I needed to know all about home loans in India and are home loans risky in long-term perspective. I needed to plan my finances at-least for next 10 years to the T and be very sure about it.
It had to be a well-thought and planned move after knowing what is about home loan and other important aspects?
What is about Home Loans?
A home loan or housing loan is the money bank pays the builder or a developer on your behalf once you have made the initial booking amount or down-payment to book the unit. It is a secured loan where lender which extends the loan retains title of the property until you have fully paid your loan and get NOC from the lender.
How basic home loan works?
Once you have made the payment to the builder, you can reach out to RBI approved institution to help you with the home loan and pay the remaining amount in parts as per developer’s payment plan.
A Lender can be a bank, non-banking financial institution or a housing finance company. Loans are available for tenure up to 30 years depending on your credit score, your repayment ability, age and various other factors which lender checks before approving the loan. Once your loan is approved, you’ll have to pay the lender in Equated monthly instalments (EMIs) comprising of Principal amount and mutually agreed interest rate. You can also use Home Loan Calculator to understand the same.
Things about Home Loans: Good or Bad?
Home loans are very tension-free types of loans if your finances are well-in place, and you have full control about your income and career growth. Once you have made the down-payment, you have to make sure to pay your lenders on time on monthly basis which keeps your credit score in check and dream-home to be true.
Choosing about home loans and lenders is as important as choosing the right property because it’s once-in a lifetime decision and you’re investing your financial as well as mental well-being. There is one thing about home loans which lenders try to keep hidden till the very end are the cost of various fees and charges to get approved for a loan. Are Home Loans risky? Might be the very next thought in your mind. However, if you do your research properly on every information provided by the lender and make the informed decision can be the best decision of your life.
4 Questions to check About Home Loans
1) How much percentage of the property cost you can be eligible for?
2) What are various hidden processing fees and charges?
3) What is the rate of interested offered about Home Loans by the lenders?
4) What is the tenure best for you depending on the EMIs you have to keep aside?
Can I get a 100% Home Loans?
It is well advised to pay at-least 10% of your actual property cost to the builder and apply for the rest 90%. Although, economically and ideally one should pay at-least 25% of the cost as down-payments on their own as it makes easier to apply about home loans and provides plenty options to apply to various lenders. Expecting 100% Home loans is unreal as many banks won’t entertain the request or would charge high which can be depreciating in longer terms as a customer. Also, it’s very tough to get approval from the lender’s credit team and various documents might be needed for 100% home loan.
Documents needed About Home Loans?
Documents are an essential thing when you look forward to availing a home loan. Therefore, you need to submit all the required documents carefully. These documents are necessary for the verification of the loan.
Here is the list of documents needed:
1) Home loan application form
2) A few passport-size photographs
3) One of the Identity proofs such as an Aadhar card, Voter card, Pan card, Passport.
4) One of the address proofs such as an Aadhar card, Passport, Voter ID card, DL, utility bills like electricity bill, water bill, telephone bill, etc.
5) Financial proofs such as the last six months’ bank statement, salary statement, ITR or income tax returns in the case of a salaried individual and financial proofs needed for self-employed individuals are the bank statements of the past few months, P and L or Profit and Loss statement, ITR or income tax returns. For self-employed individuals, Challans are also accepted as proof of Advance Income Tax payment.
6) All the asked property documents such as property purchase agreement, certificate of property possession, receipts of advance payment for the house, house allotment letter from the society, approved building plan, non-encumbrance certificate, NOC or No Objection Certificate, Power of attorney, etc.
Once the lender / bank issues your sanction letter, you have to provide all the property papers, payments made to the builder till date, policies made under your name or your spouse and other documents pertaining to the property or lender will ask to avail from the developer also. Once lender have all the required documents, their credit team will scrutinize it and documents will remain with the lender until 100% loan has been paid by the customer.
What is the Eligibility for Home Loans?
Age: Must be 18 years above
Resident Type: Applicant must be Resident Indian or Non-resident Indian.
Employment : Customer can be Salaried or Self Employed.
Net Income : Customer should have minimum 4-5 Lacs of annual income w.r.t amount of loan to avail.
Credit Score: Customer should have a credit score of at least 700 on a registered credit bureau.
Types Of Home Loans in India:
- New Home Loans : Home Loans are approved to first time home buyers by the financial lender.
- Home Loan For Construction : A Home loan is offered to customer for construction the house on their own purchased or existing land.
- Plot Loans : Loan is offered to customer to purchase a land or plot.
- Home Loan Top-up : Home loans already approved by the Financial institution allows customer to borrow above and over the existing loan.
- Balance Transfer Home Loan : Customers transfer their existing home loan from one bank to another to avail better interest rates generally.
- Home Extension / Renovation Loans : Customers who want to renovate or extend their existing property can avail this loan.
Interest Rates About Home Loans:
Customers can avail various offers from Banking or Financial institutions about home loans. Currently SBI & Union Bank of India offer the lowest home loans at interest rates starting from 8.45% p.a. The final interest rates offered about home loans applicants would depend on their credit score, loan amount, occupation profile, employer’s profile, etc. Slight difference about home loan interest rates can amount to considerable change in customer’s EMI so potential borrower should carefully select one to choose from.
Conclusion:
One need to understand about home-loans is that it is actually one of the best ways to build an asset using a liability You can build your own asset with little amount of your own money and rest loaning it and paying them in installments.
