A Guide on Home Loans

The home loan application process can be tedious, especially for first-time home buyers. However, with some research, an individual can easily understand the entire process.

Read this article to know more about home loans.

Many individuals dream of buying a house. But not everyone can afford to purchase it with savings alone. Therefore, they turn to banks for financial help. For a lot of applicants, the home loan process may seem daunting. However, by understanding the basics of home loans, they can make the entire process stress-free.

Home Loan

A home loan is a secured credit that various banks provide to help customers purchase or construct a house. In return, the banks charge interest on the loan amount.

Types of Home Loans

Most people think that home loans can be availed only to buy a house. However, contrary to popular belief, banks offer various types of home loans based on the requirements of the customers.

Some of the most popular types are-

Loan for Home Purchase

A home purchase loan is one of the most popular types of home loans. This loan can be availed to buy a new or a used apartment. Most banks in India offer home purchase loans. However, the interest rate varies from one bank to another.

Loan for Land Purchase

An individual can avail this loan to purchase a piece of land where he/she wants to construct a house. Generally, banks provide a loan up to 75-90% of the total land cost.

Loan for Home Construction

This loan is for customers who want financial assistance to construct a house on their land. Generally, a home construction loan is disbursed in instalments.

Loan Balance Transfer

A home loan balance transfer allows a person to transfer his/her loan to another bank. Many borrowers switch to a different bank in order to avail a home loan at a lower interest rate.

Factors that Impact Home Loan Application

Monthly Income

One of the most critical factors that impact an individual’s home loan application is his/her monthly income. Banks prefer customers who can easily pay monthly household expenses as well as EMIs.

Other Loans

If an applicant has other loan commitments, then the bank might offer him/her a lower loan amount. Therefore, most experts recommend repaying all other debts before applying for a home loan.

Applicant’s Down Payment Capacity

Most banks allow a borrower to avail about 80% of the total cost of the house. They prefer individuals who can pay the rest of the amount. If a customer is unable to fund the down payment, then the bank might reject his/her home loan application.

Documents Required to Apply for a Home Loan