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  • Home Loan Guide for First Time Home Buyers

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  • If you’re one of the millennials, you’d know that owning a home has long since been the quintessential Indian dream. But in the 21st century, where an entire world’s economy hinges on a volatile stock market, buying one doesn’t come easy. If you are a first-time home buyer in particular, you need to be equipped with the know-hows of how a home loan works in the current scenario.

    While the internet is already rife with plenty of guides to help you through a home loan process, the ones available simply aren’t effective enough as they don’t cover all the bases. However, you can count on this page to give you all the information you need. From the mundane to the magnificent, you will learn all that you need to about a home loan.

    So, let’s begin with the essentials.

    Home Loan: What is it?

    A Home Loan is basically a form of financial reinforcement availed of to fund the purchase or construction of a house. In the present times, a home loan can also be used to refinance an already existing home loan or simply reimburse the cost of buying a second-hand property.

    Home Loan and Its Basic Types:

    There are several different types of home loans, depending on the purpose they are used for. Some of the most commonly seen ones are:

    • Home Purchase Loans

      Home purchase loans are, by far, the most popular types of home loans in India. This is where an individual uses the disbursed loan amount to purchase a newly built apartment or an already constructed property. Nearly every bank and financial institution in India offers this type of loan. Each of the banks, however, follow their own interest rate policy and loan terms.

    • Land Purchase Loans

      Land purchase loans, as the name suggests, are used to fund the purchase of a land where an individual is planning to construct their home. Lenders usually provide a maximum of 85%-90% of its cost, while the other 15% should be put together by the applicant.

      All the major banks and NBFCs like HDFC Bank, Axis Bank, Punjab National Bank, and DHFL among many other offer land purchase loans, albeit under a different names.

    • Home Construction Loans

      These type of loan is available for individuals who are planning to build a house of their own land. The application and approval process to avail this loan though is a little tricky. Take for example, if the individual wants the cost of land to be included as a component for the total price of the house, they must have bought the property within the previous year.

      Again, every major bank in India like HDFC, Axis, State Bank of India, Canara Bank, UCO Bank et al offer this type of loan.

    • Home Improvement Loans

      Home improvement loans are taken by individuals who are unable to mobilise enough funds to renovate the house they are living in. The maximum home improvement loan an individual is eligible for depends entirely on their debt-to-income ratio and their financial standing.

    What Is The Eligibility Criteria for a Home Loan?

    All banks and NBFCs in India have their own eligibility criteria a prospective home loan buyer has to meet. Here’s a list of the primary requirements.

    1. You need to be aged between 18 and 60 years.
    2. You need to be a salaried or a self-employed individual with a steady income.
    3. You need to earn more than the minimum income quoted by the banks.

    These three aspects qualify you for a loan. However, there are a few other factors on which your application hinges. They are:

    1. Your monthly income: When you apply for a home loan with any lender, you need to prove to them that you have at least 50% of your income ready to serve the EMIs.
    2. Other loan commitments: Having a high monthly income doesn’t necessarily guarantee you a home loan. Also, if you are in the pursuit of repaying any other loans, the total loan amount you’ll be eligible for will significantly decrease. This is why you need to make sure to clear every other loan commitment before applying for a home loan.
    3. Your down payment capability: A lender never gives out the entire loan amount you’ve applied for. In fact, the most they will give you is 80% of the value of the property. The other 20% funds should be mobilised by you. If you are applying for a new home loan, you should make sure to have the down payment fund ready so that your application doesn’t get rejected.

    What are The Documents Required to Apply for a Home Loan?

    Every home loan provider more or less follow the same documentation process before signing off on the loan application. Here are a list of documents you need to keep ready when you decide to take a home loan.

    1. Fully filled and signed application form along with a photograph.
    2. Identification proof and residence proof: For ID proof you can provide anything like your PAN Card and for residence proof, you need to provide a copy of your passport/driving license or any of the latest utility bill.
    3. Cheque for the processing fee.
    4. Bank statements of the previous 6 months.

    Besides these, there are also a few other documents you need to provide depending on whether you are a salaried or a self-employed professional.

    Salaried professionals need to provide their pay-slips for the last three months along with their Form 16 or Income Tax Returns (ITR) filing.

    Self-employed professionals, on the other hand, need to provide proof of education qualification certificate and proof of their business’ existence. Apart from this they need to provide proof of ITR for the previous three years which should also include the computation of income. Lastly, they need to provide a CA audited/certified balance sheet and profit-loss account for the previous three years.

    What are The Different Types of Home Loan Interest Rates in India?

    Before we head into home loan interest rates in India, let’s first ascertain how a rate is fixed. An interest rate on a home loan is dependent on two policies: Marginal Cost of Lending Rates (MCLR).

    MCLR policy is a policy brought into effect by the Reserve Bank of India (RBI) from April 2016 in place of Repo Rate policy. It plays a featuring role in determining the home loan lending rates set by financial institutions. Under this policy, banks need to fix a base rate based on their cost of running business based on which which they can quote an interest rate as per the borrower’s risk factor.

    If RBI increases or decreases the repo rate significantly, banks and financial institutions need to follow suit to correct the base rate as per guidelines.

    Now, that the basics of how an interest rate is set is ascertained. Let’s talk about the different types of interest rates available in India, of which they are two.

    1. Fixed Interest Rate Home Loan:

      A fixed interest rate home loan is a type of home loan rate, wherein the interest rate is fixed for the entire tenure of the loan. This means that the interest rates aren’t likely to change even if there are significant changes in the economic market. Under this type of loan, a major component of EMIs in the beginning go into servicing the interest while the principal repayment only comes in the latter half.

      Some of the advantages and disadvantages of Fixed Interest Rate Home Loan include:

      Advantages Disadvantages
      Interest rate stays the same through the tenure, which brings a level of certainty for the borrower. These loans usually workout a good 1%-2.5% more than floating rate loans.
      Helpful for good budgeters as it comes with a fixed monthly repayment schedule. Borrowers cannot take the advantage of an interest rate cuts during their loan tenure.
    2. Floating Interest Rate Home Loan:

      A floating interest rate home loan is a home loan where in the rate of interest varies according to the market conditions. This means that interest can either go up or down depending on how the market is performing.

      Some of the advantages of floating interest rate home loan include:

      Advantages Disadvantages
      Comparatively cheaper than fixed interest rate home loans, as long as the market remains stable. Market is volatile and any unexpected downturn can increase the interest rates and in turn EMIs significantly.
      This type of loan is cyclical as interest go up and come down often. This helps a borrower save a considerable sum on interest paid. If the rate goes beyond 11.5% or so, this type of loan can become an expensive burden for the borrower.

    Things That Affect Your Home Loan Application and Approval Process

    There are plenty of factors that will have a bearing on how your loan application fares with a a lender you have chosen to apply with. They are:

    1. Age
    2. Income bracket
    3. Property type and its location
    4. Market value of the property

    After you submit the required documentation to the lender, they will thoroughly vet the details you’ve provided to ensure that they check out. Depending on their findings, you will be offered a loan deal. One important thing you should understand here is that their findings will be directly proportional to the term and conditions you get.

    What Are The Home Loan Deals Offered By Some of The Leading Banks?

    Here are some of the best home loan deals offered by some of the leading banks in the country.

    • State Bank of India:

      SBI, one of the largest banks in the world, currently offers a floating rate home loan deal with a base rate of 9.75% per annum. The lending rates, however, are slightly higher. For a loan of up to Rs. 30 lakhs, the interest rate stands at 0.25% above the base rate, effective bringing the overall interest to 10%. For loans above Rs. 30 lakhs, the rate stands at 0.40% above the base rate, which brings the rate to 10.15%. The maximum tenure SBI offers goes up to 30 years.

    • HDFC Bank

      HDFC Bank, one of the largest financial institutions in India with regards to market capital to market capitalization also has an extensive home loan offering. The bank uses the Retail Prime Lending Rate (RPLR) - Spread formula to determine the interest rate, where in RPLR is the minimum rate at which the it lends and spread is discount or markup offered on the loan.

      It basically offers 3 different variants of home loans. They are:

      1. Called the Adjustable Rate Loan, this loan offers any amount at a rate that goes between 9.45%-9.95%. Here’s a table that lists the rates.
        Loan Amount Interest Rate (p.a.) RPLR - Spread
        For Women* (Any Loan Amount) 9.40 to 9.90 RPLR - (6.90 to 6.40)
        Any Loan Amount 9.45 to 9.95 RPLR - (6.95- 6.45
      2. Known as the TruFixed Loan, this loan comes with 2 and 3 year fixed rate variant. In this case too, the bank is ready to offer any loan amount.
        Loan Amount Interest Rate during 2nd and 3rd year of fixed rate term (p.a.) Interest rate after the end of fixed rate term
        For Women* (Any Loan Amount) 9.50 to 10.00 RPLR - (6.80 to 6.30)
        Any Loan Amount 9.55 to 10.05 RPLR - (6.75- 6.25)
      3. This is yet another offering, known again as TruFixed Loan, is available for 10 year fixed variants.
        Loan Amount Interest Rate after the 10 year fixed rate term (p.a.) Interest rate after the end of fixed rate term
        For Women* (Any Loan Amount) 9.70 to 10.20 RPLR - (6.60 to 6.10)
        Any Loan Amount 9.75 to 10.25 RPLR - (6.55- 6.05)
    • ICICI Bank:

      ICICI Bank, also among the leading banks in the country is offering a good home loan deal too. Here’s are a few tables that list out ICICI bank’s offering for salaried and self-employed individuals.

      For all intents and purposes I-MCLR- 1Y is the home loan benchmark set by the bank.

      1. Fixed Interest Rate for full tenure:
        Loan Amount Effective Rate of Interest (p.a.)
        Upto Rs. 30 lakh 9.75%
        Above Rs. 30 lakh 9.85%-10.10%
      2. Floating Interest Rate Loan:
        Loan Amount Effective Rate of Interest (p.a.) Rate
        Upto Rs. 5 crores 9.45% I-MCLR-0.30%
        Above Rs. 5 crores 9.75% I-MCLR-0.55%
      3. Fixed Interest Rate for 2,3 years:
        Loan Amount Fixed rate for 24/36 months Floating rate from 25th/37th month
        Upto Rs. 5 crores 9.35% I-MCLR-1Y +0.35%
        Above Rs. 5 crores 9.70% I-MCLR-1Y + 0.60%
      4. Fixed Interest Rate for 5,10 years:
        Loan Amount Fixed rate for 60/120 months Floating rate from 61st/120th month
        Upto Rs. 30 lakhs 9.45% I-MCLR-1Y +0.35%
        Above Rs. 30 lakhs 9.55%- 9.80% I-MCLR-1Y + (0.45% to 0.70%)

    What Are The Things You Should Keep in Mind Before Applying For a Home Loan?

    A home loan can be a massive burden if you don’t consider all the details that go into it. Here are a few things you should keep in mind before applying for one.

    1. Your Borrowing Capacity:

      You shouldn’t opt for a higher loan amount just because you draw a bigger paycheck. Before applying for a home loan, you should carefully understand your borrowing capability. But, how can one exactly find out the loan amount they are eligible for? It’s fairly simple.

      First things first, you need to keep in mind all the expenses you incur in a month. These may include your regular household expenses, travel, kids’ fees, utility bills, pending loan payments, and miscellaneous expenses. Once you’ve listed down all these expenses, the amount you are left with is what you can use to make the EMI payments on the home loan.

    2. Credit Score:

      You may not feel the importance of credit scores all that much, but it is the most crucial determinant of the interest rate you are likely to get. For a good home loan rate, you will need to maintain a credit score of 750 or above. Having a score such as this would endear a lender to you as they are less likely to be a liability for them. This will also help you get an interest rate which is a which basis points lower that what they officially claim.

    3. Loan Tenure:

      Home loans can often go on for over 20 years, and up to 30 years, in the case of SBI. Analyse the loan tenure you’ve been offered and see if the tenure works out for you. If you think you need more room, negotiate a better term with the bank or reduce the total loan amount you have applied for instead.

    4. The Terms and Conditions of The Loan:

      The terms and conditions you sign when borrowing a home loan is legally binding, which suggest that you have read all the terms and conditions laid out by the bank and comply with the offer. What you may not know, however, is that this is also one of the places where lenders tend to add draconian clauses and enforce them. So, avoid falling into such rabbit holes and make sure to go through all the clauses and sub clauses mentioned in the loan agreement before signing on the dotted lines.

      In the current market, purchasing a home is nothing short of an achievement. To make the best out of the situation always make sure to take a well-informed decision.

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    Home Loan Guide for First Time Home Buyers Reviews

    • Canara Bank Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan through Canara Bank directly .The rate of interest was 8 % it was very less according to my concern and not sure about the processing fee .This loan was sanctioned on time without any drawbacks .I have taken 17 lakhs for the tenure of 10 lakhs .I am totally satisfied with the service so far .
      Was this review helpful? 2
      , chennai
      Reviewed on Dec 12, 2019
    • HDFC Limited
      HDFC Limited Home Loan
      "Easy to apply loan"
      0.5 3.5/5 "Pretty good"
      I have applied a Home loan through online. My application canceled by HDFC Limited because my net salary is Rs. 25k they said its not sufficient for the loan approval. Customer service was not so good, not so bad, it is average. I think, the rate of interest was 8-10%.
      Was this review helpful? 0
      , jaipur
      Reviewed on Dec 11, 2019
    • DHFL Home Loan
      "Quick approval loan"
      0.5 3.0/5 "Satisfactory"
      I have taken a housing loan from DHFL and the loan amount of Rs. 10,50,000 for the rate of interest of 9.8%. I am paying the EMI amount of Rs. 8500 for the tenure period of 15 years since its plot cum construction loan. Bank itself approved a loan within 3 days.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Dec 11, 2019
    • LIC Housing Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through LIC Housing Finance .The rate of interest and the processing fee was quite nominal .This loan was sanctioned on exact time frame without any delay.This loan is still active and i have submitted the required documents as well .If EMI is paid on delay basis there will be extra charges.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Dec 10, 2019
    • SBI Home Loan
      "Easy loan"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan from SBI and the loan amount was Rs. 30 lakh. The rate of interest was 8.15% and i am paying EMI of Rs. 25k. Customer service was good. I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 2
      , pune
      Reviewed on Dec 09, 2019
    • Muthoot Homefin Home Loan
      "Good Finance"
      0.5 5.0/5 "Blown Away!"
      I have taken a home loan in MUTHOOT HOMEFIN LIMITED on one year before. The amount was offered of 6L which was sufficient as per my requirement. The tenure period of 7 years. My friend has suggested this finance to apply a loan. The process was smooth and sanctioned the loan within 15-20 days. Interest is nominal. Pre closure is applicable and part payment can be done of above 50K. It is nominal to pay for EMI.
      Was this review helpful? 0
      , chennai
      Reviewed on Dec 09, 2019
    • ICICI Bank Home Loan
      "Instant loan approval"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with ICICI Bank. They have taken my documentation and also completed the verification as well. The loan amount was Rs. 8.75 lakhs and the rate of interest was 8.6% i am happy with the interest.I received this loan instantly and i applied this loan through online channel.There is no pre closure charges.
      Was this review helpful? 1
      , jaipur
      Reviewed on Dec 09, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC LTD .The loan amount was sanctioned on time without any delay .The agent shared all the details about the loan process ,I have submitted the required documents on time ,This loan is still active and there was difficulties faced so far .The loan tenure is for 5 years ,i have completed 1 year successfully and need to pay EMI for another 4 years.
      Was this review helpful? 3
      , nasik
      Reviewed on Dec 07, 2019
    • HDFC Limited Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through HDFC LTD .The rate of interest was 8.25% it was nominal and all the details aboput the loan process was clearly explained by the agent .I have submitted the documents through the agent.I have got the loan amount sanctioned on time .I am satisfied with the service so far .
      Was this review helpful? 3
      , thiruvananthapuram
      Reviewed on Dec 05, 2019
    • HDFC Limited Home Loan
      "Best Service"
      0.5 5.0/5 "Blown Away!"
      I have taken Home loan directly through HDFC Ltd.The rate of interest and the processing fee was nominal .The loan amount got on time and there was no difficulties .This loan is still active and paying the premium through EMI basis without any hassle got this loan .I am completely satisfied with the service .
      Was this review helpful? 1
      , pune
      Reviewed on Dec 05, 2019
    • Oriental Bank of Commerce Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly from Oriental Bank Of commerce .The rate of interest and the processing fee was very nominal,I have got the loan amount sanctioned on time ,There was no drawbacks faced so far on using this service .From bank end all t he detail was shared and i am satisfied with the service .
      Was this review helpful? 3
      , gurgaon
      Reviewed on Dec 01, 2019
    • HDFC Limited Home Loan
      "Need to decrease the rate of interest"
      0.5 5.0/5 "Blown Away!"
      I had applied for a home loan with HDFC Limited. The loan amount was Rs. 22,00,000 and the rate of interest was 8% when i was applied , but now it increased to 9.4% need to work in rate of interest. I am paying Emi monthly Rs. 18,500 and the tenure was 18 years. They have taken my documentation and also completed the verification as well executive supported me very nicely.
      Was this review helpful? 3
      , coimbatore
      Reviewed on Nov 29, 2019
    • review Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through Home First Finance company India Pvt ltd.I have got the loan on time and the rate of interest was nominal .The documents was less and the agent clearly explained the loan process very clearly . This loan s still active and paying the premium.
      Was this review helpful? 1
      , jaipur
      Reviewed on Nov 28, 2019
    • ICICI Bank Home Loan
      "Good Service"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan directly through ICICI Bank.The rate of interest and the processing fee was medium.I have got the loan sanctioned on time .The documents was very less and each and every detail was shared clearly by the agent .This loan is still active and there was no difficulties faced so far.
      Was this review helpful? 2
      , salem
      Reviewed on Nov 26, 2019
    • DHFL Home Loan
      "Average Service"
      0.5 2.0/5 "Expected more"
      I have taken home loan directly through DHFL .The rate of interest and the processing fee was very high since had a requirement at that time taken this loan .This loan is still active and the loan got sanctioned on time .There was proper callback and follow up as well.Everything was ok but the service was average according to my point of view.
      Was this review helpful? 1
      , ahmedabad
      Reviewed on Nov 26, 2019
    • Union Bank of India Home Loan
      "Not Satisfied"
      0.5 5.0/5 "Blown Away!"
      I have taken home loan which was taken directly through Union Bank of India .The rate of interest was less it was 8.5% and still this loan is active .I have got the loan amount without any delay .All the required details about this loan was shared by the agent. According to me the service is not satisfied .
      Was this review helpful? 3
      , cuttack
      Reviewed on Nov 25, 2019
    • Axis Bank Home Loan
      "Good Service"
      0.5 4.5/5 "Excellent!"
      I have taken home loan directly through Axis Bank .The rate of interest and the processing fee was nominal and the got the loan amount on exact time frame .I am paying the premium through EMI basis .All the detail about the loan process was clearly shared by the agent .I have submitted the required documents and the process was really satisfied .
      Was this review helpful? 3
      , chennai
      Reviewed on Nov 23, 2019
    • IIFL Home Loan
      "Good Service"
      0.5 4.0/5 "Great!"
      I have taken India Infoline Housing Finance Limited directly .I have got the loan on delay basis it took 2 months of time and not got the reason for the delay .This loan is still active and there was no callback and follow up from India infoline .I have submitted the required documents and there was no drawbacks faced so far.
      Was this review helpful? 4
      , new delhi
      Reviewed on Nov 23, 2019
    • BAJAJ HOUSING FINANCE LIMITED HOME LOAN Home Loan
      "Misleading & dangerous"
      0.5 0.5/5 "Unacceptable"
      Bajaj Housing Finance tries all tricks to loot me - 1. Just before disbursement day, they hiked the Processing fee and increased the interest rate 2. After EMI stated, they suddenly hiked the EMI for one month by 20,000 due to a system issue at their end. 3. They arbitrarily deduct charges from your bank account in small amounts without telling and authorizations and randomly through a month. 4. Customer service and its Head are completely nonchalant and they fake ignorance. 5. It takes 5-6 months to resolve one issue. By that time, they will create another issue and you spend the next 5 months chasing them for its resolution. Beware the NBFCs for housing finance. Its always better to go to the leading banks.
      Was this review helpful? 1
      , kolkata
      Reviewed on Nov 23, 2019
    • HDFC Limited Home Loan
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I have applied for Home loan directly through HDFC Limited .The rate of interest was very less it is only 8.35 or 8.55% criteria but i am not sure about the exact percentage .The premium is paid on EMI basis and got the loan amount on time and not faced any difficulties .I am totally satisfied with the service.
      Was this review helpful? 1
      , mumbai
      Reviewed on Nov 22, 2019
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