Home loans: What you must know

We list 5 essential facts to know before you apply for a housing loan.

Have you found a house you want to buy and are about to apply for a home loan? Read this first.

1 Find out if the house can get a loan.

Just because you found a great house does not automatically mean that you can get a home loan on it. Certain properties cannot get a home loan in India. For instance, the sale agreement may not have a clear chain of seller-buyer agreements from first buyer to the last one. Or the property may be stuck in litigation. Or the building housing the property may be in a dilapidated condition. Approach the bank with your proposal and let them evaluate the property before you apply for the loan.

2 Find out your eligibility.

Your home loan eligibility decides the amount of money you can get as a loan. So, if your eligibility is say, Rs 45 lakh, then it is futile to look for houses costing Rs 1 crore and above if you don’t have the balance funds to pay for the purchase. Do use a loan eligibility calculator to crunch the numbers involved, and get a picture of how much loan amount you are likely to get. This helps you streamline your house hunt.

3 Applying for a pre-approved home loan saves a lot of time.

There are two evaluation processes in every loan application: Personal evaluation and property evaluation. Depending on the bank, this process can take anything from a few days to a few weeks. If you have already found a property you wish to buy, you can apply for a pre-approved loan alongside. Under this, the bank starts the process of verifying your personal credentials (income, current residence, place of work, other particulars) while you complete negotiations, pay the stamp duty and registration fees, etc. After registration, you can submit the registered sale agreement to the bank so that the rest of the evaluation can conclude. This way, you save a lot of time.

4 Your bank will have pre-approved projects to choose from.

Instead of wondering where to start looking at houses, you can check your bank’s list of pre-approved projects. These projects have funding approved on them, so evaluation times are cut by half.

5 A floating rate of interest is always better.

The home loan interest rate is the most important factor – the higher the home loan interest rate, the more expensive the loan becomes. When you research the interest rates, find out from the bank about the floating and fixed home loan interest rates they offer. The floating rate on home loans in India is better because it is automatically adjusted whenever rates fall – but they are also adjusted when the rates rise. However, if you periodically pre-pay the loan apart from paying the EMIs, then the floating rate of interest results in lower repayment and lower EMIs as well.