August 14, 2024
The real estate market is growing at a fast pace and so are its prices. This is because the demand for housing is growing, as many people have the financial power to buy their own homes. However, most home buyers cannot afford to pay out lump sum amounts to the tune of lakhs and crores and purchase property immediately. In such a scenario, home loans are a viable option to make their wish come true.
This blog discusses home loans and the necessary steps home buyers need to be aware of while financing their homes.
A home loan is a loan taken by an individual to finance their home. Like any other loan, home loans are offered by banks and financial institutions for a set tenure at a rate of interest. The borrower must repay the loan in the form of Equated Monthly Installments or EMIs every month as the name suggests. Depending on the loan amount, interest rate, and repayment schedule repayment tenure may go up to 30 years.
The eligibility criteria for a home loan change with the financial institutions. However, certain criteria remain the same for all. The minimum and maximum ages that are eligible for home loans are 18 to 70. The applicant can be salaried or non-salaried with a credit score of 750 and above. They should have a minimum work experience of 2 years. They can be a permanent Indian resident or an NRI (non-resident Indian).
The financial institution or bank has a required list of documents like Proof of Identity, age, residence, income, and other property-related documents.
1. An important step before considering a home loan is the evaluation of your finances. This helps in getting an estimate of how much home loan one is eligible for. By calculating your monthly income and expenses and deducting other financial obligations, one can arrive at the monthly EMI payment capacity. This will be used by the bank in deciding the loan amount.
2. Depending on the loan amount and other savings if any, one can arrive at the budget for the home.
3. Conducting research and comparing home loans offered by the leading banks and financial institutions, one can choose a lender who gives the best option suiting their requirements. The downpayment, rate of interest, tenure and monthly payments can be negotiated with the banks. A high rate of interest will reduce the tenure but increase the monthly payments(EMI) . Whereas, a low rate of interest will increase the tenure and reduce the EMI. One can choose their loan accordingly.
4. Finally, it is important to choose a reputed bank or financial institution to avoid discrepancies in the home loan process.
Most banks consider the reputation of the builder before approving the loan. Some builders and projects are preapproved by major banks. These are the safest projects for loans as they speed up the loan disbursement.
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