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Buying a home is a dream come true for many people. To make your dream come true, there are several banks that offer home loans in India. But to get a loan, there are several criteria that a person needs to pass in order to get a home loan.
Eligibility criteria for home loan
Eligibility criteria can be different from one bank to another. However, there are some primary criteria followed everywhere –
- The person applying for a home loan has to be a citizen of India and should be salaried or self-employed.
- Generally, the minimum age for a home loan is 21 years but in some cases, the minimum age is kept 18 years.
- You should have a professional stability and good savings history in order to receive the loan quickly.
- You must have a regular source of income in order to pay the loan within the given duration.
- Ensure that you do not have a bad credit history, atleast for past three months before going for a home loan.
- For people who are self-employed, profits earned by you decide whether you are eligible for home loan or not.
- If you are earning a salary, around 40% of your gross income can be used as EMI to repay loan amount.
Interest rates on home loans in India
SBI has recently cut its home loan after 10 months by 0.05%. The new SBI home loan starts @8.30% for women and 8.35% for others. Dena Bank offers home loans at 8.25% which is the cheapest in the list below.
|SBI||8.30% – 8.60%|
|HDFC Ltd||8.35% – 8.55%|
|LIC Housing||8.35% – 8.60%|
|ICICI Bank||8.35% – 8.85%|
|Axis Bank||8.35% – 8.75%|
|IDBI Bank||8.35% – 8.60%|
|PNB||8.55% – 8.65%|
|Allahabad Bank||8.55% – 8.65%|
|Dena Bank||8.25% – 8.30%|
|Canara Bank||8.45% – 8.65%|
|Bank of Baroda||8.35% – 8.55%|
Terminologies to be kept in mind while going for home loan
- Processing Fees – Processing fee is a charge that the borrower has to pay to the bank when the loan is sanctioned by the bank. Recently SBI was in the news for not charging anything as processing fees and this will be extended in 2018.
- Interest Rate – Interest rate is very important while choosing a bank for home loans. It is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
- Turnaround time – Turnaround time is the complete duration of the loan. It is duration between loan disbursement to the borrower and repayment by the borrower to the bank.
- Loan to Value Ratio – Loan to value ratio is a financial term used in banks. It’s a tool used to compare the purposed loan amount with the value of the property being purchased in order to evaluate the risk of the loan becoming underwater or upside-down.
- Pre-Closure Fees – Pre-closure of a loan means the borrower is willing to pay the loan amount before the decided repayment period. One needs to ask for a future date pre-closure statement. You would sign a cheque or a Demand Draft for the leftover amount and thus, your account would be closed successfully. You should check with the bank if there will be any penalty/fees charged if you go for a pre-closure.
- Prepayment Fees – Prepayment of your loan means you are paying higher than all the required EMI of the loan to reduce the tenure as well as the interest charged on the loan. The borrower needs to be precise with the date and then the bank calculates the amount due till that date. After this, the bank will assess outstanding loan amount value.
To get more insights on how to buy a perfect home, read our Home Buying Guide.