How does someone apply for home loans?
A home loan, as it implies, is availed for residential purposes such as buying a house, flat, apartment, or villa as per the desired requirements & needs. It is essential to determine total eligibility for availing home loans by showing the bank, how you will be repaying this loan amount, once your residential requirements are fulfilled.
The repayment capacity is usually determined based on your salary or income, monthly expenses as well as assets such as land, gold, or other properties; anything that can be kept in the bank for leasing out the amount for a certain time-frame. You must show that you can repay the loan before they hand it over to you.
The maximum loan amount that can be borrowed
Lenders, including banks, usually finance around 80 – 90% of the property value with the rest being considered as a down-payment amount. Although 80 – 90% of property value is the highest possible amount, it is not mandatory to borrow that much amount. However, you have to show the banks or lenders, how you will be meeting the whole required amount via your various assets. Proper documentation is needed as evidence of all your assets for proper approval or authentication of loan amounts from banks.
Documents needed for loan application
As discussed in the previous paragraph, proper documentation is sought out by banks before studying it thoroughly to either sanction or not-sanction the required loan amount. Legal & financial documents are mandatory along with identity as well as residence proofs. Income certificates and salary slips are a must as well. The salary slip should receive authentication from your employer & self-attestation by you. Form-16 for income tax returns should be included among the documents provided to the bank for availing loans. Bank statement of last 6 months is mandatory as well. Collateral security is a must for bank loans until the loan amount gets fully re-paid back. With all these right documents, it is easy for a bank to sanction a certain amount as a loan.
Loan Sanctioning Process
A sanction letter is provided, once the home loan request is approved. This sanction letter details the various terms of the loan that includes the amount, the interest rate, tenure as well as other significant information; loan terms will be valid until the last date mentioned. When the loan gets handed over, an allotment letter is to be presented along with photocopies of encumbrance certificate, a title deed, and an agreement for selling papers.
Interest Rate Options
The interest rates for home-loans can either a fixed or a floating one. Home loan interest rates are set by banks per the repo rate established by Reserve Bank of India (RBI). From July 2019, SBI became the first bank to offer RLLR (Repo Linked Lending Rate) home loans instead of the previous, MCLR (Marginal Cost of Funds based Lending Rate) home loans. Following the current situation, SBI has brought forward interest rates that are lowest among all: 7.15% – 7.30%; a perfect time to avail home loans to own your dream homes!