Buying a house is one of the biggest decisions of life that one has to make. Once you have zeroed down the property to buy the next step is to arrange for the money. To make financing an easy option, many financial institutions offer some lucrative offers and benefits on home loans. It is very important to choose the right lender for the same as a home loan is a debt which you will have to pay with time and also you will be pledging any of your assets as collateral. Factors like eligibility criteria, interest rate, processing fees, documentation process and many more need to be considered. In this article, we will discuss the aspects in detail which needs to be considered when selecting a lender when taking a home loan.
Eligibility criteria for the salaried employee:-
- A borrower should be a resident of India.
- A borrower should be between 21 and 65 years of age.
- A borrower should be a salaried individual with a work experience of 3 years or more.
- A borrower working in a tier 1 city should have a salary of Rs 30,000 per month and a borrower working in tier 2 city should have a salary of Rs 25,000 per month.
- One should have a Credit score greater or equal to 650.
Eligibility criteria for self-employed:-
- A borrower should be a resident of India.
- A borrower should be between 23-70 years of age.
- A borrower should be a self-employed individual who has been doing current business for a minimum of 5 years and earning profits.
- One should have a Credit score greater or equal to 650.
1. Loan eligibility
Eligibility criteria vary from lender to lender and avail the home loan everyone needs to fulfil the eligibility criteria. In case of home loan, usually, an applicant should be aged between 21-60, a salaried applicant with a credit score minimum 650 credit score. Applicants should have a minimum salary of Rs 25,000 and work for minimum three years and self-employed should be involved in business for a minimum of 3 years. If an applicant does not fulfil the eligibility criteria, the lender can reject the loan application, which will impact the credit history of the applicant. So, be careful while choosing the lender, check the eligibility criteria online before contacting the bank.
2. Loan amount
Home loan amount value is dependent on the value of the property, and in India, a home loan is provided for the 80%-90% of your property. So, you should manage the remaining amount on your own. The experts suggest that a borrower should pay at least 20% of the amount as a down payment to reduce the debt burden.
3. Rate of Interest
Before finalizing the lender, compare the interest rates provided by different lenders. You should go with a lender who provides the lowest interest rate because the interest rate and EMI are directly related. Also, decide whether you want to opt for a floating interest rate or fixed interest rate.
4. Turnaround time
Choose a lender who has a very less turnaround time. Turnaround time is a time taken by the bank to approve the loan and disburse the loan amount in the borrower’s account. Select a lender who has a minimum turnaround time and has a good reputation due to its customer service.
5. Processing Fees
To manage a loan, the bank charges a fee which is known as processing fees. Generally, the banks charge 0.5%-2% processing fees on the total loan amount. Select the lender who charges lowest processing fees.
6. Documentation process
List of documents required by every lender is different, some only ask for identity proof and address proof whereas there are few also look into salary slips, ITR, bank statements, property paper and many more. Choose a lender to whom you can produce the documents easily.
Documents required from salaried professional
- Bank loan form duly filled
- Address Proof- Registered Rent Agreement / electricity or telephone bills (up to 3 months old)/ Passport
- Identity Proof- Aadhaar card/ Passport / Driving License / Voter ID / PAN
- Income Proof- Last three months salary slips, Form 16 of last two years, and a copy of Income Tax PAN
- Bank Statement- Last six months bank statement which has salaries received from your current employer
- Property documents
Documents Required for Self Employed
- Address Proof- Registered Rent Agreement / electricity or telephone bills (up to 3 months old)/ Passport
- Identity Proof- Aadhaar card/ Passport / Driving License / Voter ID / PAN
- Office Address Proof- Property Documents, electricity and telephone bills
- Office Ownership Proof- Property Documents, electricity and telephone bills, Maintenance Bill.
- Business Existence Proof- the Company Registration license, Shop Establishment Act, 3 years old Saral Copy
- Income Proof- Latest 3 years Income Tax Returns which should have Computation of Income, Audit Report, Balance Sheet, Profit & Loss Account etc.
- Bank Statement- Bank statement of the last 12 months
- One coloured passport size photograph
- Property documents
7. Prepayment charges
Know the prepayment charges on home loan which the lender is charging. If you take a home loan on a fixed rate of interest, then the bank charges a penalty if the loan is prepaid. However, if the home loan is taken on a floating interest rate, then according to the RBI’s guideline bank cannot charge any penalty.
Conclusion: Before you choose a lender to avail a home loan, keep in mind that you check the loan eligibility, documentation process, interest rate and much more to avoid surprises later.
