Buying a home is a significant milestone, and for most people in India, taking a Home Loan is an essential step in making this dream a reality. Understanding the requirements for a Home Loan can help simplify the process and increase your chances of approval. Here is a guide to the essential Home Loan requirements:
Eligibility criteria
Every bank has specific eligibility criteria for a Home Loan that applicants must meet. While these criteria can vary, some common factors include:
- Age:Â Applicants should be between 21 and 65 years old. The Loan tenure should end before the borrower reaches 70 years.
- Income:Â A stable income is crucial. Salaried individuals, business owners and self-employed professionals are all eligible but must demonstrate a steady income.
- Employment:Â Salaried individuals should have at least 2-3 years of work experience, and self-employed individuals should have been in their current business for at least 3 years.
- Credit scores:Â A credit score above 700 is essential as it reflects your creditworthiness and ability to repay the Loan.
Documentation
Having the correct documents ready can expedite the Home Loan application process. Common Home Loan requirements concerning documents are:
- Identity proof:Â Aadhaar Card, PAN Card, Passport, Voter ID, or Driving License.
- Address proof:Â Utility bills, rental agreement, or Passport.
- Income proof:Â Salary slip proofs for the last 3 months, bank statements for 6 months, and Form 16 or ITR for salaried individuals. Self-employed individuals must provide ITR for the previous 3 years, profit and loss statements, and bank statements.
- Property documents:Â Sale agreement, title deeds, and no-objection certificate (NOC) from the housing society or builder.
Down payment
Lenders usually finance up to 80-90% of the property value, so you must make a down payment of 10-20%. Having this amount ready is crucial. Some lenders might offer lower down payment options but typically have higher interest rates.
Loan amount
The Loan amount you are eligible for depends on several factors, including your income, age, credit score, existing debts, and the property’s value. Lenders calculate your repayment capacity and offer a Loan amount that ensures the Equated Monthly Instalment does not exceed 40-50% of your monthly income.
Interest rates
Home Loans come with either floating or fixed interest rates. Fixed rates remain fixed throughout the Loan tenure, while floating rates change based on market conditions. Compare different lenders to find the best interest rates that suit your financial plan.
Loan tenure
Home Loan tenures typically range from 5 to 30 years. A longer tenure results in lower EMIs but higher overall interest paid. Choose a tenure that balances your monthly budget with total interest outflow.
Conclusion
Understanding these Home Loan requirements and preparing accordingly can make the home-buying process more manageable and rewarding.
