FAQ

The basic procedure for taking a loan for a home involves filling out an application form where you provide your personal details like your name, address, occupation, and income. In addition to this, you may also need to provide details about the property you wish to purchase, estimated cost, and down payment.

The basic procedure for taking a home loan in India involves the following steps:

• Determine your loan requirement: You should determine the amount of loan you need for purchasing a home, keeping in mind your budget, income, and repayment capacity.
• Research and choose a lender: Research and compare different lenders to find the one that offers the best interest rates and loan terms that suit your needs.
• Check your eligibility: Check if you meet the eligibility criteria set by the lender. Typically, lenders look for a good credit score, a stable source of income, and the ability to repay the loan.
• Submit the loan application: Submit the loan application along with the necessary documents such as identity proof, address proof, income proof, property papers, and bank statements.
• Property verification: The lender will verify the property to ensure that it is legally clear and meets their criteria.
• Loan approval: If the lender is satisfied with your documents and property, they will approve your loan and send you a loan offer letter.
• Loan disbursal: Once you accept the loan offer, the lender will disburse the loan amount to your account or directly to the seller.

The eligibility criteria for a home loan in India typically include the following:

• Age: You must be at least 21 years old to apply for a home loan.
• Income: You should have a stable source of income, and your income should meet the lender’s criteria.
• Credit score: A good credit score is necessary to get a home loan. Most lenders look for a credit score of at least 650.
• Property: The property that you are purchasing should be legally clear, and the lender should be satisfied with the property documents.
• Co-applicant: Some lenders may require you to have a co-applicant for the loan. A co-applicant can be a spouse, parent, or any other family member.

In addition to the loan amount, there may be extra costs involved in applying for a home loan. These may include application charges, administrative charges, legal fees, franking fees, notary fees, indemnity costs, CERSAI (Central Registry of Securitization Asset Reconstruction and Security Interest of India) charges, and documentation fees. It is important to carefully review and understand all these charges before applying for a home loan.

Banks consider various factors when granting a home loan. Some of the key factors that banks consider are:

• Credit score: A credit score is a key factor that banks consider while granting a home loan. A good credit score shows the borrower’s creditworthiness and ability to repay the loan. Generally, banks look for a credit score of 650 or above to approve a home loan.
• Income and employment stability: Banks evaluate the borrower’s income and employment stability to ensure that they have a regular source of income and are capable of repaying the loan. They generally prefer borrowers who have been employed with the same organization for a longer period of time.
• Age and repayment capacity: Banks consider the borrower’s age and repayment capacity while granting a home loan. They look for borrowers who have a longer repayment capacity and are likely to repay the loan on time.
• Property location and value: Banks evaluate the location and value of the property to ensure that it is legally clear and meets their criteria. They may also consider the resale value of the property in case of default.
• Down payment: Banks prefer borrowers who can make a higher down payment as it reduces the loan amount and the risk of default.
• Debt-to-income ratio: Banks consider the borrower’s debt-to-income ratio while granting a home loan. The debt-to-income ratio is the ratio of the borrower’s monthly debt payments to their monthly income. A lower debt-to-income ratio indicates a borrower’s higher repayment capacity.

there are various charges associated with home loan that a buyer needs to know before applying for one. These charges may vary depending on the bank or financial institution from which you are seeking the loan. Some of the charges that you may need to pay include:

• Application Fee: This fee is charged for processing the loan application and is usually non-refundable.
• Processing Fee: This fee is levied on the cost of credit appraisal and depends on the type and amount of loan.
• Late Payment Charges: If you miss your EMI payments, the bank may levy a late payment charge.
• Document Verification Charges: This fee is charged for verifying the documents provided by you.
• Legal Fee: This fee is charged for the legal scrutiny of the concerned documents.
• Technical Valuation Charges: These charges are levied for the technical valuation of the property.
• CERSAI Charges: This fee is charged for registering the mortgage with the Central Registry of Securitization Asset Reconstruction and Security Interest of India.

It is advisable to carefully read the loan agreement and understand all the charges associated with the loan before signing the agreement.

Pre-qualified and pre-approved are two terms used in the context of home loans that are often used interchangeably but they are not the same. Here’s how they differ:

• Pre-qualification: Pre-qualification is the initial stage in the home loan process. It involves submitting basic details about your financial situation, such as your income, expenses, and credit score, and other financial documents like income tax returns, balance sheets, etc. to a lender who then estimates the amount of loan you could potentially qualify for. This estimate is based on the information provided by the borrower and is not a guarantee that the loan will be approved. The pre-qualification process can take up to 30-45 days,
• Pre-approval: Pre-approval is a more thorough evaluation of your creditworthiness and financial situation. This involves a lender reviewing your credit report, income statements, bank statements, and other financial documents to determine your ability to repay the loan. Pre-approval provides a conditional offer for a specific loan amount, interest rate, and other terms, which is valid for a specific period, usually 60-90 days. Pre-approved phase can take around 4-5 days for the loan to close.

It is important to note that stamp duty should be paid before the execution of the document, and failure to pay stamp duty can lead to legal consequences.

The Indian Government offers tax benefits under different sections of the Income Tax Act, 1961, which include:

• Section 80C: You can claim a deduction of up to Rs. 1.5 lakhs per financial year on the principal repayment of your home loan.
• Section 24(b): You can claim a deduction of up to Rs. 2 lakhs per financial year on the interest paid on your home loan for a self-occupied property. If the property is not self-occupied, there is no limit on the amount of interest that can be claimed as a deduction.
• Section 80EEA: You can claim an additional deduction of up to Rs. 1.5 lakhs per financial year on the interest paid on a home loan if you are a first-time homebuyer and the value of the property does not exceed Rs. 45 lakhs.
• Section 80EE: You can claim a deduction of up to Rs. 50,000 per financial year on the interest paid on a home loan if you are a first-time homebuyer and the value of the property does not exceed Rs. 35 lakhs.

It is important to note that to avail of these tax benefits, you need to provide the necessary documents such as the home loan certificate and the interest certificate to your employer or the Income Tax Department.

In addition to securing all the necessary property documents for a home loan, it is essential to familiarize yourself with the repayment process. Once the disbursement check is created, your home loan EMI payments will begin. Typically, you will start paying EMIs from the month following the disbursement of funds. It is important to note that EMIs must be paid on a fixed date each month. For instance, if you decide to pay your home loan EMI on the 5th day of each month, and the disbursement check was issued on the 25th of the previous month, your first EMI will cover the period from the 25th of the previous month to the 5th of the current month.

To determine the EMI amount based on the loan amount, tenor, and interest rate, you can use an EMI calculator. Repayment of the loan is done in EMIs, which includes both the principal and interest.

Yes, tenure does affect the cost of a home loan in India. The tenure of the loan is the duration over which you will be repaying the loan. A longer tenure will result in lower EMI payments, but it will also increase the total interest you pay over the loan’s entire term. On the other hand, a shorter tenure will result in higher EMI payments, but you will pay less interest over the loan’s term. Therefore, it is essential to strike a balance between the EMI amount and the loan tenure to ensure that you can repay the loan comfortably without stretching your finances too much.

Pre-EMI is the interest charged by the lender on the partial disbursement of the loan amount, usually during the construction phase of the property. The pre-EMI payments are typically made monthly and only cover the interest portion of the loan amount disbursed, not the principal.

The pre-EMI payments are usually lower than the regular EMI payments since they only cover the interest component of the loan. Once the construction of the property is complete and the full disbursement of the loan is made, the borrower can start paying the regular EMIs, which include both the principal and interest.

It is important to note that pre-EMI payments do not reduce the principal amount of the loan, which means that the loan balance will remain the same until the regular EMIs start.