Home Loans

In order to be eligible for a home loan, you need to be • A Salaried individual, or • A self-employed individual/ professional.

Whether the payment is partial or full, it impacts your credit score only when you default. A settlement (meaning a final repayment that is less than the full contractual repayment) will be visible in your credit report and is likely to impact your ability to raise new credit in the future. However, making a full payment, after defaulting for a few months, will help you in regaining some points that you might have lost during the period of default. Merely prepaying a loan on which prompt historical payment have been made does not impacts your credit score.

Below are some points that you must consider before taking a home loan: 1. Know you loan eligibility: The loan amount to be sanctioned depends a lot upon previous record of repayment of loans and credit card dues and also upon your income. How much money you can spare to pay the installment from your stated income? Before taking loan, you must be give a good thought to the installment that you are willing to give out each month. Generally a loan up to 80% of the total cost of the property is approved by banks, but that is not sacrosanct. 2. Check your credit score: Check your CIBIL™ score. The CIBIL™ Score is in the range of between 300 and 900 points. The score is evaluated on the basis of your credit card bill payment history, existing loans or liabilities, loan repayments and how many times you have applied for loan till date. If you are paying the processing fee to at least three to four banks to know your maximum limit, then you are considered 'credit hungry' in the eyes of CIBIL™ and your chances of getting the loan reduces. 3. Choose your lender: Do a thorough research to find a suitable lender such as a bank or financing company for your home loan. Take the guidance of experts so you are able to make the best decision. 4. Type of interest rate: There are two types of interest rates on loans - one is fixed rate and other is floating rate. In home loans with fixed rate of interest, the amount of each installment do not change throughout the duration of repayment, while in the home loans with floating rate of interest it changes along with the change in interest rate. It is wiser to have home loan with floating rate if the interest rates are expected to go down in near future. 5. Tenure of loan: The longer the tenure for the loan, the smaller will be the EMI amount, and vice-a-versa. So weigh all options before you take a final decision. 6. Know about extra charges that need to be paid: Get the complete information about all the extra charges that you will have to pay to take a home loan like processing fee, service and administrative fee, etc. These charges are included in the loan amount that is actually sanctioned to you. 7. Read the document of agreement: Read the complete loan agreement carefully before signing it. They can be quite a handful to read, but take your time and read every word carefully to ensure that all the terms and conditions are the same as what you agreed upon."

but there are a few conditions to it. The specifics of the amount, interest rate, varies from lender to lender.

because a Home Loan fundamentally is a debt/liability and once you take it, you give banks a ""Standing Instruction"" to debit a certain amount (your EMI) monthly on a specific date. Also, on the date of EMI payment, these Standing Instructions are issued only on your Savings or Current account & not on your Credit Cards. Also, because the credit card in itself provides you with a sort of a loan and you must not pay one loan with another one because this won’t literally reduce any of your overall liability but instead will further increase it. Try to reduce your debt always for a better and more secured financial life!"

Most of the banks approve a loan for 80% of the property value. However, the exact loan amount depends on the borrower’s eligibility for the home loan. To be eligible to take a home loan, you must have a good credit history. A poor credit history will lead to a poor credit score and a low credit score or a credit fraud can lead to the rejection of the home loan application. Therefore, credit scores, credit history and credit activity have a huge effect on home loan approvals. In addition to higher credit score requirements, several missed payments, frequent lateness, and other derogatory credit information can also lead to rejection of the home loan application. Make payments for your bills on time regularly, lower your credit utilization, and keep your credit report in healthy shape. Cleaning up your credit history beforehand and fixing errors on your credit report are key to keeping up a good credit score. Also, stability of job is crucial. Do not change your job if you have applied for a home loan. Any changes to your employment or income status can also lead to rejection of your application or delay process. Lastly, you have to find out the best home loan deal for you. Approaching numerous banks and comparing their interest rates can be a very cumbersome process.

There are basically three types of insurances that a bank might insist upon - term insurance on life of the borrower, insurance of property against damage, etc. and insurance of loan amount against credit risk. But, none of them is compulsory and it is completely the borrower’s choice. In practice, there are a few lenders who might make their loan sanction conditional upon availing any one or more of the above insurances. In that case, the borrower is absolutely free to either accept the loan sanction, or reject it or negotiate with the lender.

"1. All the PSU Banks, Private Banks as well as Housing Finance NBFCs like LICHFL, CanFin Homes etc. extend Home Loans. The Terms and Conditions are naturally bound to vary from Bank to Bank and from case to case, but the variations will be only minimal and not very significant as to make any huge difference. It is always preferable to approach the Bank with which you have a long standing relationship, like maintaining salary or corporate accounts, substantial personal or family deposits, and even availment and repayment of earlier loans.The bankers, as a rule, are risk averse, and would prefer to sanction loans to known persons with a good track record rather than to a totally unknown person, and it is here that your earlier/longer association with the Bank will facilitate the positive and prompt processing of your loan requirement. 2. Your eligibility for the loan will be determined by your satisfactory compliance with the statutory KYC norms of the Banks, your financial status and repayment capacity. Within this, the banks will consider the quantum of the loan as the least imporant as compared with the following three criteria: a. FOUR Times of your Annual Income, based on the average of Last Three years Income Tax Returns or Audited Balance Sheets. If necessary, you can add some very close relative (Father, Mother, Spouse, Son or Daughter) as a joint borrower, so that the joint incomes of both can be considered for the purpose of this calculation. b. 80 to 85% of the registered value of the property proposed to be acquired. The balance 15 to 20% will be considered your margin, and has to be borne by you. c. This is by far the most difficult and complicated criteria, which most of the people may find some what difficult. The EMI (Equated Monthly Instalment) should not exceed 30 to 35 % of the Net Monthly Income/ Cash Flow. This again can be managed to some extent by (1) the combined monthly income of the joint borrowers, and (2) opting for a longer repayment schedule to reduce the amount of EMI. Now, based on the above, let us see what is needed to have a home loan of INR One Crore: (a) A Minimum Average Annual Income of INR 25,00,000 (b) The property to be acquired must have a minimum Registered value (cost/price) of INR 1,25,00,000 (the margin taken as 20%) and most importantly, (c) The EMI should not exceed 35 % of the Net Monthly Income. So, for a 15 years repayment, the EMI for INR One crore will work out to about INR 92,000.So the minimum monthly income of the borrower(s) should not be less than INR 2.60 Lakhs. So, now you have a fair idea about the value of the property you would prefer to purchase, and the quantum of the loan amount you will be eligible for. Further, the bank will insist on the following Documents for considering the loan: 1.Title Verification and Legal Opinion from the Bank's APPROVED Advocate, regarding the correctness of the Title to the property, and compliance with other statutory requirements like Plan Approval, Building Permit etc. 2.Valuation Report from the Bank's APPROVED Architect, as to the correctness of the building plan and the value of the property. 3.The property acquired out of the bank's loan needs to be mortgaged to the bank during the currency of the loan. Over and above these, the banks may, and usually do, insist on Surety/Guarantee of a third party of adequate means. Although this appears to be somewhat tedious, in reality, all these can be completed smoothly, if the required documents are in good order. While availing the loan, insist on Fixed Rate of Interest rather than Floating Rate ( but, Banks generally do not entertain this). It is generally better to go in for a 15 years repayment period to minimize the stipulated EMI, as you can always pay more than the EMI, which will reduce your loan period as well as interest burden. If you choose, you can even pre-close / pre-pay your loan with nil to nominal pre-payment charges. This is only a practical guide to the technical aspects of getting Home Loans from banks in India.The terms may vary from bank to bank. Rate Of Interest: Differs from bank to bank, and also according to the quantum of the loan and the repayment period. Anyway the rates are likely to be in the 9% to 11% band. Period Of Loan: Better to go in for 15 years tenure. You can always pay more or even pre-close the loan at a later date if you so choose. The Banks charge interest on a reducing balance basis only, and you will be paying interest only on the outstanding amount on any day.This may not reduce your EMI, if you pay more, but will certainly reduce your loan repayment period and the total interest outgo."

After the payment of your part principal, you can opt to reduce the number of EMIs or the installment amount. By default, the number of EMIs get reduced and your last installment date is notified.

Applying for a home loan without proper research can lead to rejection of your application and may negatievly impact your credit score as well. 1) Keep your credit report clean: The first thing a lender looks at before start evaluation of your application is your credit report. Therefore, it is better to make all the payments for all the dues that you have and start improving your credit score. 2) Pay off existing debts: Pay off any kind of existing debts that you might have as multiple loans may impact your loan eligibility. 3) Stability of office and residence: Lenders verify your job and stability to avoid any risks of fraud or desertions during the repayment period. 4) Banking habits: Most lenders also seek your bank account statements to see how your previous repayment record have been, before approving a loan.