Buying a new home is still a dream for many people worldwide. The chances of you hearing about people saving up their lifetime salary to buy a home are high. The ongoing COVID-19 pandemic has made people realise how important it is to have your own home.
For many people, it is impossible to buy their dream house with their savings because of the sky’s rising prices of real estate in India. It is why most people have to take out a housing loan to buy and build their dream home.
Taking the route of a home loan to buy and build your dream house is a wise choice, no doubt about that, because it may take a long time to save the entire cost of the house. Also, a home loan gives you a chance to complete your dream of having your own house without compromising your other life goals.
So, if you have your eyes on the house of your dreams, keep these five crucial home loan criteria in your mind before applying for a housing loan.
Eligibility criteria for a home loan
Some factors like your age, annual income, credit score, etc., will decide the amount of home loan you will get.
To avail of a home loan:
- You must be a resident of India
- If you are a salaried worker, your age must lie between 23 to 62 years, and if you are self-employed, your age must fall between 25 and 70 years.
- If you are a salaried applicant, you must have at least three years of experience, and if you are self-employed, you should retain a minimum of five years of business continuity.
Along with these criteria, you are required to show proof of your income and that you are eligible to repay the home loan. If it is not inevitable whether or not you are eligible for the loan, you must check home loan eligibility criteria through the eligibility calculator offered by your lender.
Documents required for a home loan
The documentary confirmation of your income will depend on whether you are a salaried employee, a professional, or a business owner. It is crucial to understand that these documents will differ from lender to lender, but some standard documents are
Documents for KYC, like
- PAN Card
- Aadhar card
- Election card
Proof of address (utility bills)
Proof of identity, like
- Driving license
- Election card
- Aadhaar card
Passport size photograph
Proof of income
- A salaried employee can show their salary slips
- A self-employed person can show their last six months’ bank account and financial statement
- A self-employed person has to show proof of their business
The effect of credit score
A borrower’s credit profile is crucial because it enables lenders to deliver you the lowest home loan interest rate. Lenders wish for a 700 or above credit score to consider a home loan applicant. Many lending institutions have started to give lower interest fees to borrowers depending on credit records. If your credit record is lower than 700, you can make critical efforts to strengthen it before searching lenders for home loans.. Lenders wish for a 700 or above credit score to consider a home loan applicant. Many lending institutions have started to give lower interest fees to borrowers depending on credit records. If your credit record is lower than 700, you can make critical efforts to strengthen it before searching lenders for home loans.
Multiple lenders give up to 90% of the market value of the house you want to buy as the loan amount. The borrower must adjust the remaining balance from personal reserves or other sources essential for a down payment. Preferably, decide to create a sizable down payment and acquire a less loan percentage to maintain the interest pressure inadequate.
Interest rate and processing fees
When you apply for a housing loan check for interest rates whether they are fixed or flexible. Processing fees also impact your home loan amount. They are generally up to 1% of the entire loan amount depending on the lender. You can negotiate interest rates and processing charges with your lender.
Knowing the essentials of a home loan, it is time for you to contact a reliable lender to complete the process. The lender provides home loans with interest rates starting at 6.5% p.a. They also offer loan amount up to 90% of the home property value. The applicant can visit their website and check their loan eligibility and estimate their EMI using different online calculators.