When formalized banking in India settled into standardized practices by the 1970s, there was still no particular distinction for specific “Home Loan” products with its special clauses and allowances. In 1991, with the opening liberalization of the Indian economy, many nationalized banks started to enter the market of Home Loans like their international counterparts. The introduction of the new reforms in the banks like –
- Proper loan recovery mechanism.
- Flexible floating rates depending on the cost of funds
- Introduction of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) in 2002 – giving the banks more power to deal with the Home Loan defaulters.
- Reducing the average age of the borrowers in tandem with educated youth, rising salaries, and international investment.
- Concessions in Income Tax – where the interest paid on home loans could be deducted from taxable income – (introduced by the Government of India), etc. acted as a catalyst for the Home Loan borrowers.
As banks started giving home loans and introduced new products like Home loan balance transfer, plot loans, home extension loan and so on. Customers started availing themselves of the suddenly available home loans that catered to their needs. As home loans were a better option rather than saving money and buying a house.
Today, Home loans are a significant part of a bank’s portfolio with efficient and quick mechanisms. Nowadays, getting a home loan is effortless compared to the scenario 10 years ago.
The digital transformation has made the home loan process much easier.
How can I get a home loan?
Today, applying for a home loan is extremely simple and quick. The procedure may vary from bank to bank, but overall, it remains the same. Here is a step-by-step guide to applying for a home loan:
- Check your eligibility
The first step before starting the home loan process is to determine your eligibility. The criteria may differ according to a bank or lender and your approval depends upon your income, credit behavior, and existing relationship with the bank.
The common parameters that determine your eligibility for a home loan are-
- Age – 18-70 years.
- A minimum income of Rs.25,000 per month.
- CIBIL score above 700.
- Employment status (Salaried and self-employed).
- A minimum work experience of 2 years.
- Your residential status (Permanent Resident or Non-Resident Indian).
- Loan-to-value (*LTV) ratio – a lending risk assessment by a bank or lender. (Learn more about LTV ratio here)
- Your property type (land or plot, completed or under construction, buy and build home and so on).
- The loan amount is decided by the bank or lender.
- Check your offers
Once you fulfill the eligibility criteria, check the complete details of your home loan, the rate of interest offered by banks, and the tenure of the loan amount.
Different banks will try to court you by offering lower interest rates or preferential repayment terms – always go with the most trusted bank and be clear about all charges.
- Fill the loan application form
After selecting the bank that caters to your needs. Fill the loan application form provided in the official portal. The application form requires some basic information about the applicant that includes: –
- Your personal detail like your Name, Phone Number and so on
- Your address details
- Proof of Income
- Education qualification
- Your property details and its estimated cost
- Present means of financing the property
- Attach your valid documents
Once the form is filled, attach all your valid documents required by the bank including: –
- Your identity proofs/proof of identity
- Address proof/proof of address
- Age proof/proof of age, birth certificate,
- Employment details/Current employer/ Details of employment or employer
- Educational proof
- Bank statement
- Property details and sufficient copies of relevant documents (if finalised)
- Upload the documents
Upload your form application along with your valid document. After the submission, you need to pay a processing fee to the bank. The processing fee is collected to maintain your loan account. This usually ranges from 0.25% to 0.50% of the requested amount.
- Receive your Home Loan
After the completion of the above steps, you will receive your loan amount in your bank account.
Once your home loan is approved, your funds become available for you to use as you see fit in building or buying your dream home!