The home loan process is a bit more complex than processing other loans such as personal loans because it involves a huge amount and risks also. So many people want to know how the process is, so let’s look at it closer.
The first step in getting a home loan is to check if you qualify and how much you can borrow. Lenders look at several factors to determine this, including your income, job status, age, credit score, and any current debts.
Income Stability: Lenders prefer salaried individuals with a steady income or self-employed professionals with a regular cash flow.
CIBIL Score: CIBIL score of 750 or above is best for getting home loan approval with better interest rates.
Existing Loans: If you’re already paying other loans (like a car loan or personal loan), lenders may reduce the loan amount you’re eligible for.
Age: Most lenders prefer borrowers who are between 21 and 60 years old. The loan tenure typically can’t extend beyond your retirement age.
After confirming your eligibility for a home loan, the next step is to decide how much money you need. Most banks and NBFCs offer loans of up to 80-90% of the property's value. You will need to cover the remaining amount with your savings or other sources of funds.
Loan Amount: If the property costs ₹50 lakh, a bank may offer a loan of ₹40-45 lakh. You’ll need to arrange for the down payment of 10-20%.
Loan Tenure: Home loans generally have a tenure of up to 30 years. Longer tenure means lower EMIs but a higher overall interest payout.
Every banks and NBFCs offer different home loan products. It’s important to compare lenders based on several factors like interest rates, processing fees, loan tenure, and repayment options.
Interest Rates: Lenders offer both fixed and floating interest rates. A fixed interest rate remains constant, while a floating interest rate changes with market conditions.
Processing Fees: Banks often charge processing fees ranging from 0.5% to 1% of the loan amount. Some banks offer promotions that waive these fees. (in this festival season Dussehra and Diwali many banks waive the processing fees for home loans)
Prepayment Penalties: Some lenders charge penalties if you choose to prepay the loan amount or foreclose the loan early. Look for lenders with no prepayment fees.
After choosing your preferred lender, the next step is to collect the necessary documents for your loan application. While different lenders may ask for different documents, the most common ones include:
Identity Proof (Aadhaar, PAN card, passport)
Address Proof (utility bills, rental agreements)
Income Proof (salary slips for salaried individuals or ITR for self-employed)
Property Documents (sale deed, property title, etc.)
Bank Statements (usually for the past 6-12 months)
Employment Details (offer letter, appointment letter)
Once you have all your documents ready, you can apply for the home loan either online or offline.
Fill out the application form: Provide all necessary details such as personal information, property details, loan amount, and tenure.
Submit the documents: Upload the scanned copies if applying online or submit physical copies at the bank branch.
Pay the processing fee: This can be done via net banking, UPI, or credit/debit cards. Some banks deduct the processing fee directly from your loan amount.
Once your application is submitted, the lender will conduct a thorough verification process. This includes:
Document Verification: Lenders will check that the documents you provided are real. They might also contact your employer to confirm your job status.
Credit History Check: Your CIBIL score and credit history will be examined to see how well you repay loans.
Property Valuation: Lenders will send an expert to evaluate the property's value and legal status, making sure there are no disputes or issues.
If everything looks good, the lender will provide a loan sanction letter. This letter will include details like the loan amount, repayment period, interest rate, and other terms.
If there are any problems, the lender may ask for more documents or reject the application if the risks are too high.
Note: The approval process can take up to 2-3 weeks depending on the complexity of documents, loan amount, and others.
Once the loan is approved, the next step is loan disbursement. This happens in two ways:
Full Disbursement: If the property is ready to move in, the entire loan amount is given at once and sent directly to the seller's account.
Partial Disbursement: For properties that are still being built, the loan is given in stages based on how the construction is progressing. You will only start paying EMIs on the amount that has been disbursed.
Once the loan is disbursed, you start repaying it through EMIs . EMIs are a combination of principal repayment and interest payment.
The EMI remains constant throughout the loan tenure if you choose a fixed interest rate. For floating rates, the EMI can change based on market conditions.
Tip: To reduce your EMI burden, you can make prepayments whenever you have extra funds. This helps reduce the overall interest you pay on the loan.
If you receive a large amount of money, you might think about paying off your loan early or making a big prepayment. Many banks and NBFCs in India let you make partial prepayments without any extra fees.
One of the best things about home loans is the tax benefits. The Indian government offers tax deductions on both principal repayment and interest payment under Section 80C and Section 24(b) of the Income Tax Act.
You can claim up to ₹1.5 lakh in tax deductions on the principal repayment under Section 80C.
You can claim up to ₹2 lakh in tax deductions on the interest payment under Section 24(b) for self-occupied properties.
Tax Tip: If you're buying the property jointly with a spouse or parent, both co-borrowers can claim tax benefits, effectively doubling the deduction.
In conclusion, knowing how the home loan process works is important for making smart choices when buying a property. From checking if you're eligible to collecting the right documents and getting approved, each step is key to getting the loan that suits you best. Being organized and proactive can help make the process easier and prevent mistakes. Always read the terms carefully and ask questions if you have any doubts before you agree. With good preparation and understanding, you can confidently move forward toward owning your dream home.
The first step is to determine your eligibility for a loan and understand how much you can borrow based on your income, credit score, and other factors.
Most banks and NBFCs offer up to 80-90% of the property’s value as a loan. You will need to cover the remaining amount with your savings.
Common documents include identity proof, income proof, property documents, and bank statements. Exact requirements may vary by lender.
After approval, the lender will provide a loan sanction letter detailing the loan amount, interest rate, and terms. The funds will then be disbursed according to the type of property.
No List Founds!
Your email address will not be published. Required fields are marked *
