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Taking First home loan? Here’s what you should know about banks lending home loans

In an ideal world, we would image everyone to have enough money to fulfill all their desires. But unfortunately, we all fall in different graphs of a financial chart, and have different priorities and want different things from life. A rock star might own a dozen houses but still live in his bus, while a middle-class man will works overtime to save in order to invest in a house. Thanks to Housing loans the poor can boost their dreams by taking a financial support from these loans. Home Loans are one of the most popular loans in the world, maybe because of the significance of the house. Not only can you apply for a home loan to purchase a house but also for renovation, extension, and repairs to your existing house.

How much can loan amount can you apply for?

Before starting your home loan process, use a home loan calculator, which is available online to determine how much amount are you eligible to apply for which depends directly on the repayment capacity of the applicant.

An applicant’s repayment capacity can be calculated using his/her monthly income. Most banks in India allow applicants to apply for 20x their monthly income as a loan amount. For Home loans, an applicant can take up to 80 to 90 % of the total property amount from the banks, which entirely depends on his/her repayment capacity.  You can even boost your eligibility by representing your spouse or parents income in your applicant, by inserting their names as co-applicants.

Home Loans are secured loans, which can be put against collateral like a property, jewelry asset as security against the loan. This helps in reducing significant reducing the interest rate on these loans. However, a home loan is in itself a secure as the house’s official documents and custody remains with the bank until the whole loan has been paid by the bank.

Necessity of a Co-Applicant

It is mandatory to have a co-applicant in order to apply for a loan. This assures the bank that will be available to repay the loan, in case the applicant steps back. In case there is a co-owner of the property, he/she also needs to be the co-applicant for the loan. In case you a sole owner, then you can put any member of your family as a co-owner.

Documents required to Apply for Home Loan

  • A Completed loan application
  • 3 Passport size photographs
  • Identity Proof: (Voters ID card/ PAN card/ Passport/ Driving license)
  • Address Proof: (Property tax receipt/ Passport/ Telephone Bills/ Electricity Bill/  Voters ID card)
  • Business Address and Business Proof (non-salaried individuals)
  • Latest Salary Receipts (Salaried individual)
  • Bank Statement or Six Months Transaction record from Pass Book
  • Attested Documents from the officials of Current Bank
  • Assets and Liabilities statement

What happens after you have submitted your loan application?

Once you have submitted all your information, the bank runs down verification on all your details to authenticate all your personal and financial details. Banks also checks the property that you the applicant want to purchase, to check it off any fraud and scam.

How does Home Loans are sanctioned?

Once your application is submitted and the bank is satisfied with your information and has double checked everything, they place your loan for further processing after which is sanctioned, which is a sort of loan confirmation so congratulations. Now the bank will provide you a sanction letter, which will include all loan details forms its amount, interest rate, tenure etc along with other important home loan terms and conditions. Once you sign the sanction letter, your loan is disbursed.

How does the loan disburse?

The loan amount can disburse in the form of full amount or installments, which is usually paid in three installments. In case you have applied for a property, which is still under construction, then the bank makes disbursements in the form of installments according to the construction process. So ensure to make an agreement with your builder that you will make payment according to the progress of the construction, rather than on a time schedule. In most cases of constructed properties, the disbursement is made in full payment.

So go ahead and apply for a loan, and own your dream house today.