Are you looking for a home loan and how to get it? To help you with this we have covered the basics you need to get a housing loan.
Almost everyone’s life dream is to own a house. Congrats, you are looking to build your dream home.
The right time to build your dream home.
While you are looking for a home loan you will come across the following.
- Home loan eligibility.
- How much home loan can I get?
- What documents are required for a home loan?
- Which bank should I choose for a home loan?
- Home loan interest rates.
- Per month, how much should I pay?
- Can you repay the home loan?
- Pay the principal amount before the loan period
Table of Contents
Home loan eligibility
Home loan eligibility is calculated to let you know the housing loan amount you are eligible for.
Housing loan amount eligibility can vary depending upon
- The salary you get,
- IT you file as individual,
- Your bank transactions for last years,
- Previous loans
The above factors are directly or indirectly connected to your cibil score.
The get home loan required cibil score must be at least 650. A cibil score above 750 is considered a good score for home loans.
How cibil score is calculated – read here.
How much home loan can I get?
The home loan amount you can get depends upon your eligibility and your credit/cibil score.
Salaried persons get home loans easily compared to the self-employed persons.
Salaried
If you are a salaried person then you will get a home loan up to 60 times of your monthly salary.
For example your salary is 40,000 per month, you will have up to 24 Lakhs home loan.
This loan also you will get, only if you don’t have any other loans such as personal loan, education loan, vehicle loan.
Self-employed or Business owner
If you are self-employed or business owner then you must have filed income tax returns for a few years (depends from bank to bank).
Depending upon your business and profits the loan will be availed.
For example your annual net income is 10 lakhs then you will get a loan up to 30 lakhs.
You will get this loan only if you don’t have any other loan on your business.
What documents are required for a home loan?
The documents required for home loan differ for salaried person and business person.
If salaried documents required
- Salary or pay slip – for required period, previous 6 months or 1 year
- Form 16 or IT Returns – for required period, past 2 financial years
If self-employed or Business owner documents required
- Income tax return statement for required period past 3 years
- Proof of business
- Current bank account statement
Personal documents required
- Identity proof – Aadhar, Voter Id, Driving license
- Passport size photo
- Address proof – Ration card
- Pan card
- Age Proof – Passport, 10/12 marksheet, Birth certificate
- Bank statement – for required period, previous 6 months or 1 year
Property documents are required
- Land or property document
- Land or property valuation document
- Home approval plan
- Home estimation copy
Still some more documents may be required from the bank side.
The home loan application is also different from bank to bank.
Which bank should I choose for a home loan?
It’s better to go with the bank which provides
- Low processing fees
- Low interest rates
- Allows to partial loan repayment on principle
If the above mentions suits with your bank where you already have an account and ease of access, then go with that bank.
Here are some banks where you can enquire for home loans.
- SBI
- HDFC
- KVB
- IOB
- ICICI
- AXIS
- Canara
- And more.
Home loan interest rates
Home loan interest rates and processing fees differ from bank to bank.
| Bank | Interest* |
| State Bank of India | 9.15% p.a. onwards |
| HDFC Bank | 8.45% p.a. onwards |
| Karur Vysya Bank | 8.15% p.a. onwards |
| Indian Overseas Bank | 9.55% p.a. onwards |
| Axis Bank | 9.00% p.a. onwards |
| Canara Bank | 9.25% p.a. onwards |
These interest rates are just mentioned as per our research. Please check with your nearby bank with your own credit score. It will give you the accurate interest rate.
Also check with the processing fees for home loans – read here.
Per month, how much should I pay?
Per month how much you need to pay is basically calculated with
- The loan amount you can get
- Housing loan interest rate
- Number of years you take to repay the housing loan
For example let’s assume a housing loan amount you are eligible for 50 lakhs with 9% interest rate for 25 years.
Then you have to pay monthly around ₹41,960 for 25 years.
For understanding use EMI calculators.
Can you repay the home loan?
To answer this question you have to know about your expenses with salary or income in detail.
You must calculate your monthly expenses and savings too. As this housing loan should not affect your current or future living expenses.
Your home loan amount must be at least ⅓ of your salary or income.
For example
Lets take your EMI to be paid ₹ 40,000 per month, your salary per month must be at least ₹ 1,20,000.
Your monthly expenses must be between ₹ 40,000 to ₹ 50,000 per month.
In this way you can check whether you can repay the home loan without any problem.
The calculation is made just on our view and it’s not a suggestion. Please make your own calculations with your living expenses, other expenses and salary or income.
Pay the principal amount partly before the loan period
Some people might think we are trapped in a home loan. We have to pay this loan our whole life.
The simple way to reduce your loan interest and the years to pay the loan is by paying a partial amount on the principal amount of the home loan.
For Example you have taken a loan of 40 lakhs. You have to pay around 32,000 per month. Your salary or income is 1,00,000 per month.
You can try to save some money every month from your salary or income and pay some amount in the principal loan amount 40 lakhs.
You can try to save 20,000 per month. A year you will save up to 20000*12 = 2,40,000 rupees.
With this 2.4 lakhs you can pay for your housing loan amount and reduce your principal amount. Which will also help to reduce the EMI you pay every month.
Within 5 years you would have paid 12 lakh rupees in your 40 lakhs home loan.
Which means you have reduced your housing loan by 30 percent in 5 years.
By 10 years you would have reduced your 60 percent loan amount, which is to be paid for almost 25 to 30 years.
This is how you have to reduce your home loan as much as possible.
Final verdict
You need to know how the home loan process works and how you can get a loan at low interest rates.
Try to enquire at most banks as you can get a housing loan at a low interest rate.
Keep an eye on housing loan processing fees.
Ask whether principal repayment is available in a housing loan.
Try to complete the principal repayment as early.
Also read about residential construction cost per square feet.
FAQ
Q1: I have a bank account only in SBI and I don’t have a bank account in HDFC. Will I get a housing loan from HDFC?
Ans: Yes, you will get a housing loan from any bank depending on your home loan eligibility even if you don’t have a bank account in that particular bank.
Q2: How to get home loans at low interest rates?
Ans: Low interest rate depends on your credit score. And check with all banks nearby.
Q3: When will I get the home loan I got sanctioned?
Ans: Once you finish your home foundation bank provides the home loan at every stage as mentioned.
Q4: How much money do I need before getting a housing loan?
Ans: The money for your house foundation works is required. As the bank starts to release the housing loan only when you finish the foundation of your house. To know about 1200 sq ft house construction cost in Tamil Nadu – read here.
Q5: How can I reduce my monthly EMI?
Ans: By repaying your home loan principal partly every year, you can reduce your EMI amount to be paid monthly. Read above mentioned “Pay the principal amount partly before the loan period” to know more in detail.
