Home Loan: All you need to know

The article covers all the information you need while taking a home loan. Starting from what is the eligibility criterion to take a home loan to the maximum amount you can borrow, the article covers it all. Also, it covers the whole process from applying to getting the money in hand.

Things You Shouldn't Miss about Home Loans

Are you planning to buy a flat or house? Or, do you want to buy a plot where you want to build your dream home? To your good news, fulfilling these dreams has become easier with the help of home loans.

Here, you will get all the required details about home loans.  

1. What is your home loan eligibility?

As you begin the process of taking a home loan, the first and foremost thing you need to find out is how much bank loan you are eligible for. Your eligibility mainly depends on your repayment capacity, which depends on your financial stability. 

The bank must ensure that you can repay the loan within the given time frame. In simple words, the loan amount will depend on your monthly disposable income, and the higher your income is, the higher will be the loan amount. While making the calculation, the bank assumes that about half of your monthly disposable income will be used for the repayment purpose and then comes up with the loan you are eligible for. 

Also read: Home Loan Balance Transfer- How to Prepare for It?

2. What is the maximum amount you can borrow?

You may need to show a down payment of 10% to 20% of the house's total price in most cases. This down payment is your contribution, and you can borrow the remaining amount from the bank. Also, keep in mind that the loan amount also includes the additional registration charges, stamp duty, etc. 

You can borrow a lesser amount than you are eligible to. However, the bank may be lending a higher amount, but taking the maximum financed amount is not compulsory. You must keep your repaying capacity in mind while taking the home loan. 

Related: Getting a Home Loan? Know These Loan Charges Before You Apply

3. Is a co-applicant necessary for a home loan?

It depends on the property in the acquisition, and if the property has a co-owner, then a co-applicant is necessary for a home loan. Simply, the co-owner of the property needs to be added as the co-applicant while applying for the loan. Whereas, if you are the only owner of the property, there is no compulsion of adding any co-applicant. However, you may add any of your family members as a co-applicant if you wish to. 

4. What are the documents required for home loan?

When taking a home loan, you need to make arrangements for all the home loan documents mentioned in the loan application form. You need to submit all the legal documents or proof that you are purchasing a house. You also need to attach a photo to the application. The bank also may ask you to provide your identity and residence proof. 

Also, you may have to provide proof of your latest monthly income. Plus, the bank needs to have details regarding your income-tax return and your transactions for the last six months. In some cases, you may also need to share documents regarding the savings and investments you have made so far. 

5. How will the disbursement take place?

After you provide all the required documents, the authority lies on the lending bank whether you are eligible for the home loan or not. If the bank is satisfied with all your documents, it will sanction the loan. You will get a sanction letter, which will contain all the details, including the loan amount, tenure, rate of interest, and all other necessary terms. 

The loan amount will be handed over to you after the bank completes all the technical, legal, and valuation steps. At the final stage, you will have to provide other essential documents like allotment paper, xerox copies of title deeds, agreement to sell papers, etc. Even during the disbursement, you may opt for a lower loan amount than the one mentioned in the sanction letter. 

As you complete all the above steps, you will finally receive the loan amount. Here, you may opt for disbursal in whole or in installments. Whichever option you choose, it must coincide with your financial needs while building your home. 

Also Read: Home Loan Disbursement Process

6. What are the home loan interest rate options?

You may opt for a fixed rate of interest or a flexible rate of interest for your home loan. In the first case, the interest rate remains the same during the whole tenure, while, in the second case, the rate is not fixed and will keep on changing depending on various factors.


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