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.
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
- Application form along with a photograph
- Identification Proof
- Address Proof
- Bank statements (Last 6 months)
Along with the aforementioned documents, applicants must provide a few other documents-
For Salaried Individuals
- Salary slips (Last 3 months)
- ITR or Form 16
For Self-Employed Individuals
- ITR (Last 3 years)
- Balance Sheet and Profit and Loss Account Statement audited/certified by a CA
- Proof of Education Qualification Certificate
- Proof of Business’ Existence
Apart from these documents, banks may ask for additional documents.