A Guide to Securing Your Dream Home with a Home Loan

Securing a property loan involves navigating various factors such as credit history, property appraisal, and more.

This home loan guide on Ghar will help you understand the essentials that impact your eligibility for home financing.

Understanding Home Loan Eligibility

A combination of factors affect your home loan eligibility (the amount that the bank or financial institution will fund you). Some of the main factors are listed below:

1. Your income - salary or business profits

2. Title/Age of the property you plan to buy

3. Market valuation of the property you plan to buy

4. Type of property (commercial or residential) that you plan to buy

5. Your CIBIL score and your financial history (previous loans etc)

NOTE:

In the current Indian real estate market, owning a home might seem daunting due to high prices. However, home loans make this goal attainable. According to a credit bureau report, home loans between ₹5 lakh and ₹35 lakh hold the largest value share at 36.9%, followed by loans between ₹35 lakh and ₹75 lakh at 31.4%, and loans above ₹75 lakh at 29.8%.

This shows that people from various income brackets can access home loans. Public sector banks are leaders in lending home loans ranging from ₹35 lakh to ₹75 lakh, whereas private banks dominate loans above ₹75 lakh. Public lenders' slightly more lenient eligibility criteria make them the top lenders, with a 40.4% share. Given the substantial amounts involved, lenders thoroughly assess several factors before approving a loan.

Understanding Credit Score

The first step for banks is to evaluate your creditworthiness to minimize their risk. Your credit score and history are critical. A bank agent explains that a credit score typically ranges from 300 to 900, with a score between 650 and 750 considered good, and above 750 deemed excellent, potentially helping you negotiate better interest rates. The agent also mentions that maintaining a clean credit history with timely payments significantly boosts loan approval chances.

Your income / salary is an important criterion

Your income level directly affects your loan repayment capacity and the amount you can borrow.

The agent notes that for solo borrowers, lenders scrutinize income and employment history to ensure repayment capability. For joint applications, the combined income of both applicants is considered, enhancing eligibility and the possibility of a higher loan amount.

An IT professional who bought a home with her husband on a dual income shares that their credit score and stable jobs were pivotal in the process. They secured 82% of the property value as a loan, with the down payment covered by their savings.

Ensure your papers are in order

Proper documentation is crucial for a home loan application. Verifying identity, income, and property details in advance is essential.

Commonly required documents for home loan include:

Identity proof (Aadhaar card, PAN card, or passport)

Address proof (utility bills or rental agreement)

Income proof (salary slips for the last three months, Form 16, and income tax returns for the last two to three years) &

Property documents (sale agreement, property tax receipts, No Objection Certificate, and Encumbrance Certificate).

Budget Wisely

The property you plan to buy usually serves as collateral for the loan. A real estate agent informs that a professional appointed by the lending bank will conduct an independent appraisal of your property to assess its condition and market value.

Based on this appraisal and your eligibility, lenders typically finance up to 80-90% of the property value. The agent recommends that buyers arrange the down payment and required documentation, compare interest rates and processing fees from different banks, and keep savings aside for incidental costs.

While acquiring a home loan is a common practice, it's essential to be financially prepared to handle equated monthly installments (EMIs) and other upfront and long-term home-buying expenses.