You generally take a home loan for either buying a house/flat or a plot of land for construction of a house, or renovation, extension and repairs to your existing house.
How much loan am I eligible for?
Before you start the home loan process, determine your total eligibility, which will mainly depend on your repaying capacity. Your repayment capacity is based on your monthly disposable/surplus income, which, in turn, is based on factors such as total monthly income/surplus less monthly expenses, and other factors like spouse’s income, assets, liabilities, stability of income, etc.
The bank has to make sure that you’re able to repay the loan on time. The higher the monthly disposable income, the higher will be the loan amount you will be eligible for. Typically, a bank assumes that about 50% of your monthly disposable/surplus income is available for repayment. The tenure and interest rate will also determine the loan amount.Further, the banks generally fix an upper age limit for home loan applicants, which could impact one’s eligibility.
What is the maximum amount I can borrow?
Most lenders require 10-20% of the home’s purchase price as a down payment from you. It is also called ‘one’s own contribution’ by some lenders. The rest, which is 80-90% of the property value, is financed by the lender. The total financed amount also includes registration, transfer and stamp duty charges.
Is a co-applicant necessary for a home loan?
Yes, it is (mostly) mandatory to have a co-applicant. If someone is the co-owner of the property in question, it is necessary that he/she also be the co-applicant for the home loan. If you are the sole owner of the property, any member of your immediate family can be your co-applicant.
What documents are generally sought for loan approval?
The loan application form gives a checklist of documents to be attached with it, along with a photograph. In addition to all the legal documents related to the purchase of the house, the bank will also ask you to submit your identity and residence proofs, latest salary slip (authenticated by the employer and self-attested by you) and Form 16 or income-tax return (for businessmen/self-employed) and the last 6 months bank statements/balance sheet, as applicable. Some lenders may also require collateral security like the assignment of life insurance policies, pledge of shares, national savings certificates, mutual fund units, bank deposits or other investments.
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