Population level in big cities is always on the rise as people move in search of better opportunities. This has substantially increased the real estate prices, making it very difficult for people to afford houses. However, financial institutions are always in fierce competition to grab market share. Thanks to this competition, there are many housing loan products that lenders offer to win customers. To entice borrowers, lenders even offer a low home loan interest rate to borrowers having a good track record or financial stability.
Now, it is natural for a first-time buyer to be a little apprehensive about applying for a home loan. With the right knowledge, however, a home loan plan could be the perfect solution to finance a house in a big city.
Here’s what you should be aware of when it comes to home loans:
Documents required for a home loan
|Salaried applicants||Self-employed applicants|
|Identity documents: Any one of the following – AadhaarVoter cardPANPassportDriving licence||Identity documents: Any one of the following – AadhaarVoter cardPANPassportDriving licence Address proof- Any one of the following – Aadhaar cardDriving licenceVoter IDRent agreementLatest utility billBank statement The lender can also ask you to submit additional documents wherever applicable – Shop and establishment certificatePartnership deed (partnership firm) or Memorandum of Association (company)VAT registration certificatePAN cardProfessional qualification certificate/ Certificate of practiceSEBI registration certificateProof of business address|
|Income documents: Salary slip for last two monthsBank statement for last six monthsForm 16 or Income Tax Returns of last three yearsInvestment proofs, if any||Income documents: Income tax documents with computation for the last two financial yearsAudited Profit and Loss account and Balance Sheet duly attested by a Chartered AccountantCopy of the saving account of the applicant and current account statement of the business entity for the last six months.|
|Property documents: No Objection Certificate from builder/ societyPayment receipt certifying payment made to seller/builderProperty tax recipesMaintenance receipt and electricity billsAn approved copy of the building planOccupancy certificateRegistered sales deedA detailed estimate of the construction cost.||Property documents: No objection certificate from builder/ societyPayment receipt certifying payment made to seller/builderProperty tax recipesMaintenance receipt and electricity billsAn approved copy of the building planOccupancy certificateRegistered sales deedA detailed estimate of the construction cost.|
Once all these documents are submitted, the lender will then check the borrower’s credit score and evaluate their income and expense patterns.
Home loan approval process
Many borrowers make the mistake of thinking that only their monthly incomes are taken into consideration for their housing loan applications. However, there are many other factors that lenders rely on during the loan approval process. The most important factor that lenders look at is the credit score of the borrower. A credit score ranges between 300 to 900, and it is always best to maintain a credit score of 750 and above. It is also very important for borrowers to keep a close eye on their savings, monthly expenses, outstanding debts, as well as credit card bills. These are factors that a lender will take into consideration while reviewing loan applications.
Choosing a home loan
Now, you will face no shortage of options when you apply for home loan. However, which one should you opt for? This would depend on each borrower’s situation. The most important factor that needs to be ensured while applying for a housing loan is that it is in line with their long-term financial goals. This involves being able to pay back the home loan EMI without any financial difficulty. It is also important to check various lenders and the interest rates they are offering.
Lastly, it is always a good practice to use home loan eligibility calculator in order to find out the loan amount you are eligible to receive. Lenders also offer EMI calculators on their websites so that borrowers can get an accurate estimate of the loan’s monthly instalments.