Taking a home loan could be a daunting affair for most new buyers. Here is a step by step guide to help demystify the most crucial aspects, before setting into motion the process of your home loan.

  1. Obtaining your credit report:
  2. This is the starting point, and the process has simplified ever since RBI made it mandatory for credit bureaus to provide their customers with a free credit report each year. Any credit score above 750 is considered good, and is an indication of how consistent an individual has been with paying off previous loans.

  3. Meeting eligibility Criteria:
  4. Every bank has a rule book for eligibility criteria which needs to be fulfilled before the loan is approved. This includes:
    • Age: Any potential borrower is eligible for a home loan, with an age above 21 years, or less than 60 years to make sure the loan ends before their retirement
    • Salary: The higher the monthly disposable income, the higher will be the loan amount a borrower is eligible for. Typically, a bank assumes that 50% of disposable monthly income/surplus income is available for repayment.
    • Employers status: Banks and NBFC have a list of good companies, which determine the stability of the borrower’s job, and thereby determine their ability to repay the loan.
    • Documents: a typical local application form will have a checklist of Home Loan documents to submit along with a photograph. In addition to all legal documents related to purchase of house below is what is needed:
      • Residential and identity proof,
      • Proof of employment with salary slips,
      • Last six months’ bank statements,
      • FORM-16 or income tax return,
      • In many cases, the bank may even require collateral security like life insurance policies, pledges of share, national savings certificates, mutual fund units, bank deposits or any other form of investments

  5. Down Payment Preparedness:
  6. As per the RBI policy, all banks are only eligible to offer a maximum of 80% of the total value of the property as a loan – hence, it is always recommended to keep aside some funds for the initial down payment

  7. Co- applicant:
  8. In most cases, it is mandatory to have a co-applicant. It is important to note, that a co-applicant may or may not be a co-owner, but yet banks insist on having a co-applicant as it gives them extra surety in case of a default or death of the primary applicant.

  9. Loan Sanction:
  10. Based on documentary proof, the bank decides whether or not the loan can be sanctioned to you.
Click here to apply for a home loan.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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