All About First Buyer Home Loan

With a robust 9.6 per cent growth registered in the third quarter of FY 2021, the housing loan market is likely to grow despite the COVID-19 pandemic. It can be a great opportunity for a first-time buyer to negotiate a good deal in securing a home loan.

The amount of money borrowed from a bank or a financial institution to purchase an apartment or a property is called a home loan .

Following are some features of a home loan-

1. It is a secured loan where the property papers are kept as collateral by the lender during the loan period.
2. The loan amount, along with a certain interest, is repaid by the borrower, usually at fixed monthly intervals called Equated Monthly Instalments or EMIs.
3. A home loan can be taken jointly by spouses on meeting the eligibility criteria of the lender.

• Home Purchase Loan It is one of the most popular types of home loans where the individual uses the loan amount to buy an apartment or a house.
• Home Extension Loan You can apply for a home extension loan to add more space to your existing residential property. For example, you can use this loan to add a garage, room, or a new floor to your existing home.
• Home Improvement Loan You can use this loan to renovate your existing residential property by carrying out repairs and improvements. This loan can be ideal for overhauling or restoration of old houses.
• Plot & Home Construction Loan This loan is given to purchase a piece of land and build a house on that land within the next few years. This type of loan is given in instalments. The loan instalments can be sanctioned on factors like the purchase of plot, submission of the approved construction plan, the commencement of construction, and other factors specified under terms and conditions.
• Home Construction Loan You can avail of this loan if you want to construct a house over a piece of land you already own.

home loan eligibility criteria in India can vary among different banks and financial institutions. However, the following criteria are common across all financial institutions.

• ○60 years – for a salaried individual.
• ○70 years – for a self-employed person.

• The applicant needs to be 21 years old or higher.
• The applicant should have a steady source of income in the form of a salary or business
• The maximum age of the applicant at the time of maturity of the loan should not exceed

1. A loan application form, duly filled and signed by the applicant, along with the applicant’s photograph
2. aadhar card of the applicant
3. Identity proof, such as PAN card
4. Signature proof
5. Proof of residence, such as passport, driving license, or the latest electricity bill.
6. Proof of office
7. Proof of qualification
8. Non-refundable fee cheque
9. Details of limits and loans availed
10. Previous loan repayment track record, if any
11. Bank verification form

Apart from the aforementioned documents, you need to submit the following documents depending upon your income type:

• Last 3-months salary slip or salary certificate
• Latest Form 16 issued by the employer
• Latest 6-months bank statement reflecting salary credit

• Financial documents of last 2-years
• ITR documents
• Partnership deed and MOA (Memorandum of understanding)
• Latest 6-months bank statements
• Tax returns for the current financial year

• Salaried Individual
• Self Employed / Professional / Partnership/Company

One of the key things that borrowers look at while looking at home loan offers is the interest rate offered by the lender. With loan amounts running into lakhs or crores and tenures usually ranging between 20-25 years, even the slightest change in interest rare can cause a huge difference in your EMI and your total interest outgo.Lenders usually fix the interest rate based on the cost of borrowed funds, liquidity conditions prevailing in the market, the credit risk, the tenor of the loan, and the margin.

There are two types of home loan interest rates in India – fixed interest rates and floating interest rates .

A lot of factors can affect your home loan application and the sanctioned loan amount. They can be

1. Age A lower age can be an advantage in securing a desirable loan.
2. Income A high and regular source of income can help in getting the desired loan. However, you can secure a loan with a moderate-income level if the lender is convinced of your repayment capacity.
3. Interest Rate Model Different borrowers are not likely to get the same rate of interest for the same product. The lender determines the interest rate depending upon various factors such as loan tenure, credit risk involved, prevailing market conditions, etc.
4. Location and Value of the Property A loan is more likely to be sanctioned if the property is likely to witness capital appreciation in the future.
5. CIBIL Score CIBIL Score determines your repayment ability. A high CIBIL score can help you in getting faster loan approval.

Today, many reputed lenders try to attract first-time home-buyers with amazing offers such as low-interest rates, longer loan repayment tenure, zero pre-payment charges, etc. Therefore, it can be the right time for such buyers to strike a lucrative deal with their preferred lender. After all, nothing is better than the feeling of returning to a home that you own.

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.