Apply for Home Loan

A. No. Banks usually keep a 20% margin when providing individuals with a home loan. This means that the lender may agree to provide you with 80% of the property value as a home loan, while you will have to shell out the remaining 20% by yourself. In some cases, the lender may agree to provide you with up to 90% of the property value as a home loan, depending on multiple factors such as your repayment capacity, age, credit score and property related details such as its location, age and market value. Q. For what purposes can you avail a home loan? A. Following are few of the reasons to avail a home loan - To buy a new house/plot To construct a house To renovate or repair damages to your home To add a new room to your already existing home, or to expand the space in your house in some other way

A. Some of the most popular banks offering home loans in India are HDFC Bank, ICICI Bank, Bank of Baroda, Axis Bank and Canara Bank. However, the best home loan for you would be the one that matches your loan requirements. Therefore, to get the best bank for home loan first analyse your requirements. Also, when comparing home loan offers don’t jump for the offer that offers the lowest interest rate, rather check on the entire deal. Besides the interest rate, pay attention to other parameters such as processing fees and loan repayment and prepayment policies.

A. Credit score is a number between 300 and 900 that reflects how you handled your credit in the past. It not only affects the chances of your loan approval but also the interest rate at which you can borrow a sum. Most lending institutions offer the lowest rates to borrowers who have a credit score of 800 or above. Otherwise a credit score between 750 and 900 is considered good by lending institutions. Remember, higher the credit score, greater are the chances of getting your home loan approved and getting a lower preferential interest rate. Even if your credit score is low, you can improve it by paying credit card bills on time, decreasing your outstanding debt and maintaining old credit card accounts in good standing.

A. Your family members like father, mother, siblings, etc. can co-sign a home loan with you. Other than that your spouse or adult children can also be co-signatories in case you are applying for a home loan. In India, as per existing rules, your friend cannot co-sign a loan as he/she is not a blood relative or otherwise related to you.

A. At present, up to 7 people can cosign a home with the primary applicant. However, all of them need to be blood- relatives of the family member.

A. Factors that can play a crucial role in home loan rejection are mentioned below: Low credit score Incorrect personal details in credit report Frequent credit rejections by other lenders Unstable or insufficient income Age factor Location of the property

A. The below mentioned steps can prove to be beneficial to avoid home loan rejection: Credit Score: It is advisable to maintain a credit score of 750 and above to have a good chance of your application being approved. Banks & Financial Institutions rely on credit score before approving your home loan to check your credibility and loan repayment history. So, you should always maintain your credit score to avoid home loan rejection. Insufficient Income: Banks and financial institutions look into your monthly income to see if you will be able to repay your equated monthly instalments (EMIs) or not. It is always advisable to take a home loan with EMI not more than 40% of your monthly income. Lenders have certain minimum income and employment requirements which play an important role in the loan-approval process. Make sure that you meet all the requirements before you apply for a home loan. Too many applications for home loan in a short span of time: If you apply for a home loan from different lenders, it indicates to banks and financial institutions that you are short of credit and need to apply to several sources to fill the gap. Lenders think that you will not be able to repay your loan, which leads to rejection of your home loan application. Existing loan portfolio: Currently, if you have a number of loans to repay, then your lender might think that you will not be able to take on another EMI on your existing income, which will lead to your home loan rejection. So, it is better to apply for a home loan once you have paid off a few of your other loans to reduce your EMI burden.

A. Potential home loan borrowers can enhance their home loan eligibility in the following ways: Improve your credit score: A good credit score improves your chances of loan approval so that you can avail a home loan at lower interest rates and better terms. Paying your bills on time and maintaining a credit utilisation ratio below 40% are some of the ways to improve and maintain your credit score. Pay higher down payments: Financial institutions lend 75-90% of the property value. This implies that the remaining 10-25% of the property value has to be contributed as down-payment by borrowers. To increase your home loan eligibility, make a higher contribution towards your home loan down payment. Doing so will lower your LTV ratio; thus, improving your home loan eligibility. Add an earning co-applicant: Add an earning co-applicant with good credit history and satisfactory repayment capacity to increase your home loan eligibility. Joint home loan might even help you get a higher loan amount and concession on your home loan interest rates (if the co-applicant is a woman).

A. Loan-to-Value (LTV) Ratio is one of the factors, based on which a lender sanctions a home loan. It tells you the maximum loan you can get against the appraised value of the property you pledged as collateral. It is always expressed in percentage. So, if you are buying a home costing Rs. 1 crore, and your lender’s LTV ratio is 75%, then the maximum financing or loan you will get from your lender is Rs. 75 lakh. Lenders use LTV Ratio and other such series of calculations to assess their risk in sanctioning a secured loan such as a home loan. With this ratio, a financial institution ensures that it does not sanction a loan amount higher than the appraised price of the property. For a lender, a higher LTV ratio increases the perceived risk of default. Also, it is important to note that property value is not the sole factor that determines the loan amount. Lenders also consider other factors such as your credit score and repayment capacity to decide the loan amount. Lenders use LTV ratio only to determine the maximum loan amount, based on the property value.

A. Home loan balance transfer is a facility that allows home loan borrowers to transfer their outstanding home loan to a new lender for lower interest rate or better loan terms. Almost all lenders offer the home loan transfer facility to their customers. Paying your loan EMIs regularly is one of the factors that help you enjoy loan transfer facility. But before going for home loan balance transfer, carry out a cost-benefit analysis. Calculate the difference between the interest rates offered by the two lenders, the amount of the loan left unpaid and the remaining tenure. Home loan balance transfer is not an ideal option if the outstanding loan amount is low, if only a few repayment years are remaining or the difference in the interest rate is leading to negligible savings. Also, do not forget to consider processing fee charges, which the new lender would be charging for balance transfer.

A. Banks and Non-banking Finance Companies (NBFCs) offer home loans for different purposes. So before applying for any type of home loan, assess your requirements in order to get a suitable home loan scheme. Some of the types of home loans available are as follows: Home Purchase Loan: It is the most common type of home loan availed usually to buy ready-to-move-in properties, under construction properties and pre-owned homes/resale properties. As per RBI guidelines, lenders can offer loan-to-value (LTV) ratio of up to 75-90% of the property value Composite Loan: It is a perfect financing solution for individuals who want to buy a plot of land either for investment or for building a house. In this type of home loan, the first disbursement is made towards the purchase of a plot. The subsequent payments depend on the stages of construction of the house Home Construction Loan: This type of home loan is available for individuals who want funds for the construction of a house. The loan is granted only if you own a plot of land and plan to construct a house on it. Just as in composite loan, here too the disbursement depends on the stages of construction of the house Home Renovation/Improvement Loan: The can be availed to fund home renovation and home repairing expenses of the existing house. The interest rate for this loan is the same as that for a regular home loan. However, its loan tenure is shorter than the regular home loan Home Extension Loan: It is for those who require funds to add more space to their abode. Under this loan type, financial institutions usually lend 75-90% of the construction estimate, depending on the loan amount and LTV ratio Bridge Loan: It is a short-term home loan and is suitable for individuals who wish to buy a new house with the sale proceeds of the existing home. The loan helps in covering the gap between the purchase of a new house and the sale of an existing house Interest Saver Loan: It is similar to a home loan overdraft facility. In this, the borrowers’ home loan account is linked to their bank account. Any amount deposited in the bank account over and above the EMI amount is used as prepayment towards the loan, thus, saving on the interest amount Step Up Loan: Yet another type of home loan in which borrowers pay lower EMIs during the initial years of the loan tenure. However, there is a provision of increasing the EMI amount over time. This makes the loan affordable for young professionals who just start their career

A. In case of a floating rate home loan, lenders don't charge a pre-payment penalty as per RBI directives however a penalty may be applied either in case of prepayment of a fixed-rate home loan or where some Firm or Company is applicant or co-applicant in the loan structure.