Home Loan Requirements: What Is Home Loan?

Owning a house is a dream for many

Owning a house is a dream for many. House or any real estate for that matter, is the best form of investment. When people decide to purchase a house they usually opt for financial assistance or loan from a renowned financial institution. Various banks and other finance companies offer easy home loans in India. If you are planning to purchase a house with home loan, then thorough financial planning and basic knowledge about the loan formalities is mandatory. Once you get acquainted with the same, you can opt for any of the various money-lending organizations.

What is a home loan?

Home or housing loan is a kind of secured loan which is offered against some kind of property. This property is funded by the bank or the respective financial institution. Any person can seek a home loan for purchasing residential and commercial properties. When you buy a property with help of a housing loan, that bank purchases it on your behalf. It means you are the borrower of the property, which you will own once you pay all the money in installments.

If you fail to pay these installments within the predetermined tenure, the bank has the right to sell that property and retrieve the money due. In other words, the house that you purchase on home loan becomes your collateral for the same. Given the fact, you need to be extra cautious while determining the loan amount, repayment tenure, home loan insurance and interest rate.

Considerations and requirements

Some individuals opt for borrowing different loans from various sources and end up in debt traps. Think of your age, monthly income, job stability and other financial commitments before estimating the loan amount.

Keep in mind that you also need to make a down payment, which is about 7 to 25% of the total purchase price. When it comes to the tenure of repayment, consider your age. If you take longer tenure then you will pay small EMIs, but it will not prove affordable in the long run.

A short tenure on the other hand will make you pay a higher EMI. The best way is to choose a period of 10 to 15 years, which is neither too long nor too short.

Many financial experts advise you to buy home loan insurance in case of demise or loss of job. In case you lose your job or life, your insurer pays your housing loan.

Never forget to consider the interest rate. Home loans in India are available with both fixed and fluctuating interest rates. Experts advise you to go with a hybrid interest rate which allows you the combination of fixed and floating interest.

Inquire about all sorts of processing costs, hidden charges, service taxes and annual costs that are applicable for your loan. The public relations officer of your bank or loan provider is the best person to consult further.

Almost all banks require you to submit basic documents including age proof, residence proof, and income proof for both applicant and co-applicant, bank account statements, past salary slips, passport-size photographs, employment certificate, Form 16 and sometimes a guarantor.

by: lindadale

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