20 SEPTEMBER, 2022

Building a dream house or purchasing one is considered quintessential in many ways. Home loans help individuals achieve this goal by providing the required financial support. A home loan is not restricted to purchasing a new property but can also be availed for construction, renovation, and repairs on an existing property.

Various lending institutions offer home loans in India. Still, one must closely analyze the associated terms and conditions to shortlist the best home loans as per their needs and repayment capabilities.

Before applying for a home loan

Before finding the best home loans, the applicants must analyze their financial stability and capability to repay the loans in the future. It is also essential that the loan applicants have a good credit score (as maintained by the government-approved credit rating agencies). The credit score is a key measure used by the lending institutions to approve or reject the loan application and decide the amount of loan that can be disbursed. Lastly, one must have enough savings to make the initial payment (downpayment) towards the purchase of the property, as the home loan may not cover this amount in all cases.     

Who is eligible for a home loan?

All Indian citizens who have the financial resources to repay the loan in the future are eligible to apply for a home loan. The lending institutions hold the right to demand identification and valid proof of income to substantiate the applicant's credit worthiness. In addition to this, the eligibility process also requires the applicant to produce a set of other supporting documents to build on their application. 

Some of the leading Banks and other lending institutions, which are known for offering the best home loan in India, would ask the applicant to produce the following documents:

  • Valid identification documents issued by the local government
  • Employee Identification cards issued by the employer (in the case of salaried individuals)
  • Proof of Income (in the case of salaried individuals)
  • Salary certificates issued by the employer
  • Bonafide certificate issued by the employer
  • IT Returns filed by the applicant
  • Bank statement of the applicant covering the past 6-12 months or as per the requirements of the lending institution
  • Documents establishing the address of business (in the case of business individuals)
  • IT Returns / Challans of advance Income Tax (in the case of business individuals)
  • Proof of Income (in the case of business individuals)
  • Bank statement of the applicant
  • Bank statement of the business
  • Income and Expense statement of the business
  • Proof of residential address (for both salaried and business individuals)
  • Documents that detail the property being financed

The lending institutions, in addition to the above list of documents, can request the applicant to produce other supportive documents as per their internal policies and requirements.

How much loan can one get?

The amount of the loan depends upon the financial stability of the applicants and their ability to repay it in the future. The lending institutions can also use their discretion to decide on the amount of loan that can be disbursed to the applicants based on their application and supportive documents.

Shortlisting the lending institutions

While many banking and lending institutions claim to offer the best housing loan in India, the applicant must meticulously analyze the terms and conditions of every lender. The lending terms should be in sync with the requirements of the applicant. 

Some of the key metrics that can be compared to shortlist the home loans being offered:

  • Home loan interest
  • The annual rate of interest being charged on repayments
  • Whether the rate of interest is floating or fixed
  • Amount of monthly or annual installments
  • Processing fee charged
  • Penalty fee on late payment or non-repayment
  • Any other hidden charges
  • Benefits / Interest rate discounts offered by the lending institution

The lending institutions lay out their home loan offering and the terms and conditions associated with it on their websites. The applicants also have the option of walking into their nearest branches to source the details via a printed prospectus or through assistance provided by their sales executive.

How to apply for a home loan?

The applicants have the option to fill out the loan application details on the lending institution's webpage, which is followed up by an invitation extended by the lenders to applicants to visit their bank branches. There are different ways to apply for a home loan, which is as per the applicants' discretion and financial standing. Some of the options are laid out below:

  1. Individual applicant: The loan amount to be disbursed is calculated based on the financial standing of the single applicant.
  2. Co-applicants: There is an option to co-borrow the loan with another applicant, but this also means that the property's ownership will have the applicants' names.
  3. Documents: The applicants need to produce all the documents mandated by the lending institution to analyze their credit worthiness before disbursing the loan.
  4. Tenure: The applicants can decide on the tenure for repayment of the loan.
  5. Defaults: There shouldn't exist any past or present payment defaults on the name of the applicant as this may impact their loan application. 

What are the best home loans?

The best home loan in India may differ from one individual to the other depending upon their financial standing, repayment capabilities, and other unique factors. The best housing loan in India can only be determined when the applicants clearly understand their requirements and then go about finding a home loan offer that fits into it.

Lastly, in addition to financing the home needs, taking a home loan also has other benefits. The interest paid on home loans is eligible for tax exemptions. The applicant can submit the loan repayment documents to claim these exemptions. Taking a home loan also ensures that the applicants do not impact their liquidity as the financing is through a loan and their bank balance does not show an immediate impact. Also, there is additional due diligence of the property carried out by the lending institutions which benefits the applicant who intends to purchase the property. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.