Are you currently hunting for your next abode but are falling short on funds? If yes, borrowing a loan is the best way to finance this purchase.
After all, a housing loan allows you to fund:
- A residential property
- A plot for land for house construction
- A house extension or renovation project
But before you apply for one, learn about how a home loan works below.
How does a home loan work in India?
When you apply for a housing loan, lenders follow due process to verify your credentials before advancing the amount. Firstly, they assess your eligibility and repayment capacity to decide on terms like home loan interest rateand amount. Once that’s decided, they carry out a legal and technical verification of your chosen property or plot. And based on the evaluation, sanction the loan.
However, lenders only finance 75-90% of the property cost upfront, while you pay the remaining portion of the total cost as down payment.
Additional Read: Home Loan Terms You Should Know Before Taking a Home Loan
Steps to borrow a home loan
Now that you know how do house loans work, let’s dive into the borrowing process. Here are the steps you can follow to borrow a housing loan.
1. Choose a reliable lender
First off, you must research the market and compare the interest rates offered by prospective financial institutions to make an informed decision.
2. Check your eligibility
While going through different lenders, check their home loan eligibility terms online. This step is critical as you must qualify the eligibility criteria to apply for the loan, and it typically varies from lender to lender.
3. Maintain a good credit score
For most lenders, your credit score is a significant factor in the eligibility assessment. To be eligible for a home loan, you must have a decent CIBIL score, ideally above 700, reflecting your creditworthiness to the lender. So, make sure your credit information report is updated and free of errors.
4. Understand the extra charges
After selecting your lender, make sure you enquire about any hidden charges that come with the loan. There are several charges such as the processing fee, prepayment charges and EMI default penalties that you must know before applying for the loan.
5. Save for a down payment
Since housing loans are a long commitment, planning your finances is a must. Lenders will expect you to pay a large down payment. This can make the loan more affordable for you and reduce the amount and number of EMIs later.
6. Keep your documents ready
And finally, before you apply for the loan, keep all the necessary documents handy. You can check the list of documents required by visiting your lender’s website and prepare them beforehand to save time. Besides, if you apply online, you can speed up the process for further time-saving.
Additional Read: What is a Home Loan? Everything You Need to Know About Home Loans
If you plan to purchase a new home, a housing loan from Tata Capital is an excellent finance option.
We understand that buying a house is a substantial financial and emotional investment. That’s why we offer affordable housing loans at attractive interest rates and quick processing.
Lastly, you can get an estimate of your EMIs by utilising our home loan EMI calculator. Contact us today!