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Home Loan Scheme

Owning your own house has its own importance and sense of independence in anyone’s life. Be it a farmer or an agriculturist or a budding corporate professional. Having your own house is pretty much a lifetime goal. However, to make this possible, you may have to take financial assistance (home loan) to meet the ever-rising costs of material, labour, interiors, technical help and so on. A home loan helps ease out your financial burden in buying a residential property.

There are several banks and NBFCs that offer home loans to creditworthy individuals. If you are looking for a home loan, you must know the following details to pick the best loan.

What Is a Home Loan?

Home Loan is offered to individuals who wish to construct or buy a house. The property bought or about to be constructed is mortgaged as collateral until the repayment of the loan is completed with full interest. The repayment of the loan generally depends on the capacity of the borrower. Normally, the home loan tenure ranges between 5 to 30 years. The borrower can opt either for floating type of interest or fixed interest rate. Home loan provides tax benefits to the borrowers.

Advantages of Home Loan Schemes

  • Attractive interest rates with floating and fixed type based on your preference
  • Low processing fees
  • Less paperwork
  • No prepayment charges
  • Easy home loan balance transfer
  • Transparent application process
  • Flexible repayment options
  • Door step assistance provided

Features of Home Loan Schemes

Different Types of Home Loans

There are various kinds of home loans available depending on your specific housing need:

  • The most common is the regular home loan to buy a new house or apartment or to construct a home
  • A Home Improvement Loan to carry out renovations to your existing home
  • Another kind of home loan is a Home Extension Loan. This is used to finance new construction to your home like adding a new wing or another level to your home
  • A Land Purchase Loan is taken out to fund the purchase of land, either as an investment or to construct a house on it in the future
  • You can also avail of a Bridge Loan to finance the purchase of a new home until your old home is sold

Home loan scheme eligibility

In order to be eligible for a home loan, you need to be salaried individual, or a self-employed individual/ professional. You must satisfy the age and income requirements and be able to demonstrate a stable income. If your spouse is salaried, then you can add him/her as a co applicant and this income will be considered while determining your eligibility for the loan.

What are the important factors to qualify for a home loan?

Lenders look at several factors while determining the state of your housing loan application. They include the following indicators:

Your credit score: Typically, you need a minimum credit score of 750 for lenders to proceed with processing your application. A credit score of 750 or above reassures lenders that you are a responsible borrower and have a good track record of making repayments.

Your credit report: Lenders look closely at the applicant’s credit score and credit history. They check your payment history over the years to see if you have a record of making payments on time and in full over a long period. They also check for any written-off accounts in the past to see if you have defaulted on any prior debt obligations. All these indicators of poor credit behavior are red flags for lenders, even if your current credit score is adequate. They will also look at your existing loan obligations to see if you can take on additional debt payments on your present and predicted future salary.

Employment status and salary: Lenders want to be assured that you will have a steady monthly income to pay off your EMIs over the loan period. The tenure of a home loan can stretch for decades and lenders want to know if you have a high probability of steady employment and income during that period.

Clean title deed and complete documentation of the property: While this requirement is not related to your individual credit situation, banks want to ensure that there would be no issues with the collateral (the home) in the event of a loan default. They will first make sure that all the legal documents relating to the property are in order.

Home loan interest rate

There are two basic types of home loan interest rates and you need to study all the interest rate options carefully before deciding which one to choose:

Fixed rate: An interest rate is fixed for the entire tenure of your loan and you should pay a fixed EMI for the entire duration of the loan.

Floating rate: The interest rate you pay varies during your loan tenure, depending on external market conditions. You would choose this option if you are confident that interest rates will go down during your loan period.

There is also the option of a partially fixed and partially floating rate. You need to learn about all kinds of housing loan interest rate options or consult a professional to see which option suits your needs the best.

In order to land the lowest home loans interest, you need to have an impeccable credit history.

Documents required for a home loan scheme

Following documents are generally required while applying for a home loan

Duly signed application form with photograph/s

Identity Proof for all applicants

  • Driver’s License
  • Passport
  • PAN card
  • Voter ID

Address proof for all applicants

  • Voter ID
  • Passport
  • Recent telephone, electricity, gas bills.
  • Property tax receipt

Income proof

  • Bank Statement of the past 6 months
  • Salary slips of the past 3 months
  • Form 16/ Income Tax returns

In addition, self-employed professionals and non-professionals might need to provide additional qualifications including education certificate, IT returns of the past 3 years, and CA-certified balance sheet of their business for the past 3 years. You may also need to pay a processing fee when applying.

Once the loan is sanctioned, you might need to provide further legal documents including a Power of Attorney for collecting the original property documents. You might also have to submit additional documentation regarding the property to be purchased.

How to apply for a home loan?

You can check your eligibility and apply for a home loan by signing up with CreditMantri. It is quick, simple and above all, free.

CreditMantri matches your credit and demographic profile to the lender's lending criteria and presents you a shortlist of only those lenders willing to lend to you based on your unique credit profile. In effect, we pre-screen your application to make sure you are likely to qualify as per the lender’s credit criteria. Hence the chances of your loan application getting approved is higher.

Click here to sign up and apply for loans and credit cards, the CreditMantri way!

Frequently Asked Questions Home Loan Scheme

1. What is the processing fee on home loan schemes?

The processing fee varies from lender to lender. Some lenders even waive off the entire processing fee.

2. Is there penalty for prepaying the Home Loan?

No penalty is levied for prepaying the home loan scheme.

3. Can I top up my existing Home Loan?

Yes, you can get additional funding on your existing home loan. However, the disbursement varies from lender from lender.

4. What is the maximum loan repayment period for home loans?

The maximum repayment period is 30 years. However, this could vary according to the loan scheme. For example, plot loan and home extension loan might have lower tenures.

5. How can I apply for a home loan?

You can either apply online or visit a nearest bank branch and take the help of the bank’s representative.

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