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About Home Loan

The loan is a financial term in which an individual or any financial institution such as banks, lend their money to another institution or individual. It is basically a debt provided by financial institution or individual to another individual or financial institution which later required paying by the bearer to the lender with an interest.

It is most common and secured loan in which the lender (financial institution, Banks) lend their money to construct the commercial or residential properties or for the purpose purchase commercial or residential properties. It can also be provided to purchase plot of land or even to renovate old house and property It safe and secured because the borrower or loan seeker has to produce the paper of the property against which the loan is required, in case if the loan seeker will not be able to pay back the loan amount the financial institution which lends the money can take out their lent money by selling that property. It is the estimated value of the property against which the loan has been asked to decide the amount of money which can be lent.

Types of Home Loan

Many financial institutions and banks offer loans, not for buying a home only but for different purposes. Few of the popular type of home loans which available in market by financial institutions are as follows

  • Land Purchase Loan

  • Many banks offer loan for purchasing assets like land, Land purchasing is completely depended upon and is optional, the owner of land can construct building in after saving that money or can leave it for investment purpose. Maximum up to 80-85% of the land cost can be given by lenders such as banks and financial institution.

  • Home Purchase Loan

  • It is one the most popular type of loan to purchase an old or a new home. It is commonly available in different variants and offered by different financial institution or banks. The financial institution or banks offer two type of interest rate one is fixed and other is floating and interest rate generally ranges “Between” 9.5 % to 11.50%, maximum up to 80-85% of the total amount is offered as a loan by different financial institutions like banks

  • Loans for Construction of a Home

  • This is a type of loan meant for those people who want to construct the new house as they like or want rather than purchasing a new one. The cost of the land plays an important role in the approval of this kind of loan. The land must have been purchased and should be older than one year it is one of the most important clauses when you apply for a loan for constructing the home, the loan amount can be disbursed at once or in instalments.

  • House Extension or Expansion Loans

  • Bored with the painting of the house or want to construct some extra rooms need not to worry there are many financial institutions which will provide you the loan for extra construction or renovation. HDFC and Bank of Baroda provide you a better option in this category.

  • Balance Transfer Home Loans

  • If you want to transfer your home loan from one financial institution to another you can go for Balance transfer home loan, people do that for the reason of better services and low-interest rate offered by other banks and financial institutions.

  • Home Loans for NRI

  • To attract non-residential Indian to buy a property in India it is specially designed for the application procedure and formalities are different from others. Almost all the major banks in India provide such kind of loans to NRI

Pre-condition for the home loan

There are quite few eligibility criteria for Home loan such as

  • CIBIL Score:- In India CIBIL score is also called as credit score, Credit bureaus generate the credit score which represents the creditworthiness of an individual. If a person has ever default any loan or credit card payment earlier the CIBIL score will be low and the high CIBIL score of an individual signifies that he has repaid his loan well in time. CIBIL score plays an important role in the approval of loan it is believed to be higher the CIBIL score more is the chance of approval of the loan.

  • Income of loan Borrower:-It is one of the most important factors in getting any loan, higher the income of an individual more is the chance for loan approval.

  • The rate of interest:-Generally it is of two type A. Fixed B. Floating, lower the rate of interest higher the chance of loan approval.

  • Duration:-It effect both EMI, as well as the probability of loan approval, longer the duration of loan lower, will be the EMI's and higher will be the chances of loan approval.

  • Tax Benefits:- One can save up to 1.5 lakhs under section 80c.

Tips for Home Loan

It is very important to keep these points in mind before signing any agreement of any loan, these are mention below

  • The rate of interest:- It very important to know about the rate at which the loan is given to, kindly do ask your lender about interest rate whether it is fixed or floating and chose according to and wisely.

  • Margins and down payments:-Different financial institutions have different down payment so before making any agreement kindly do ask about down payment requirement.

  • Charges:-There are different charges for loan requirements so do ask your lender before making any agreement, some of the charges are

    • Processing fee

    • Loan Origination fee

    • Administrative charges

    • Charges of changing from floating to fixed interest rate. Etc.

Many of the charges can be waived off or there is a possibility of negotiation.

Eligibility Criteria of Home Loan

The borrower can be a salaried person or he can be a professional self-employee or any businessman with reaming home loan amount which has paid their EMI on regular basis can apply for home loan of home loan, however it can vary as different lenders have difference criteria. Some of the most common home loan loan criteria are as follows

  • The borrower should be of an Indian Nationality

  • The should be in between 21 years to 60 years however in case of individual self-employee in can be up to 65 years.

  • CIBIL Score: - In India CIBIL score is also called as credit score, Credit bureaus generate the credit score which represents the creditworthiness of an individual. If a person has ever default any loan or credit card payment earlier the CIBIL score will be low and the high CIBIL score of an individual signifies that he has repaid his loan well in time. CIBIL score plays an important role in the approval of loan it is believed to be higher the CIBIL score more is the chance of approval of the loan.

  • Minimum require salary is required as to check the repaying capacity

  • Minimum gross salary of a family is required by some banks

Documents required for the Home Loan

  1. Complete Loan Application Form

  2. One Photograph of each applicant duly pasted and signed across on application form

  3. Photo Identity Proof (Any One) :-

  4. PAN Card, Passport, Driving License, and Voter’s ID card
  5. Residence Address Proof (Any One) :-

  6. Any utility bill (electricity/telephone/gas), Passport, Driving License, Voter’s ID Card, Ration Card, Leave & License Agreement
  7. For Salaried Individuals :-

    • Form 16 for Last 3 years / Annual Salary Certificate and Income Tax Return Ack.
    • Latest 6 months Salary slip
    • Bank statement/passbook copy with cover page for last 6 months
    • Employer’s ID Card copy
    • Appointment Letter / Increment Letter from the employer and also copy of previous employment letters if current employment is less than 2 years
  8. For Self Employed Business and Professionals :-

    • Last 3 years Income Tax Return Ack and complete set of financials, Audit Report, Tax payment challahs / TDS certificates
    • Last 12 months bank statements / Passbook copy with cover page of all bank a/c’s
    • In case of Company, Memorandum & Articles of Association, List of Directors and Shareholding Pattern on Company Letterhead, Latest Annual Return filed with ROC
    • In case of Partnership Firm, copy of partnership Deed
    • Company Business Profile
    • Office Address Proof (Any One) - Any utility bill (electricity/telephone), Shop & Establishment License, Leave & License Agreement, VAT / Service Tax Registration certificate
  9. Details of Existing Loans and Sanction Letters & Repayment statement of these Loans

  10. Credit Card details & latest credit card statement

  11. If Rental income is to be considered, copy of Rent Agreements

  12. Processing Fees chq

  13. Property Papers :-

    • Latest Agreement for Sale along with the previous chain / link agreements starting from 1st purchaser from builder to till date
    • Society Share Certificate (front & back side)
    • Latest Society Maintenance bill
    • Building sanction plan (Approved Plans) or Occupation Certificate

Additional documents required in case of Balance Transfer (BT) or Seller BT case:-

  • Foreclosure quotation / letter from the bank
  • Letter from the bank / financial institute stating list of documents held by them

NOTE : All documents need to be self attested by the respective applicants. For self employed, all income documents need to be certified by CA.

Major Banks dealing

Almost all the major banks in India dealing in these types of loans, some of the major bank those who are dealing with it are listed below

  • HDFC LTD

  • HDFC BANK LTD

  • AXIS BANK LTD

  • ICICI BANK LTD

  • YES Bank

  • State Bank of India

  • Bank of Baroda

  • Standard Chartered Bank

  • India Bulls Finance

  • Aditya Birla

  • DBS

  • Kotak Bank

  • Edelwise

  • DHFL

  • PNB Hosing Finance

  • Tata Housing