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Eligibility for Home Loan!
Home loan eligibility if generally considered based on your repaying capacity. The repayment capacity is calculated by the determining the monthly disposable income of applicants that is if you are applying alone then your monthly disposable income or else if you are applying for a loan with some co-applicant then your both combined income will be used to calculate the repayment capacity of your loan amount.
Banks generally consider half of your monthly take-home salary as your disposable income. Other factors that may affect your home loan eligibility amount is your spouse’s income, the total assets and liabilities you may have and the most important factor is the stability of your home loan amount. All the people who will be owning the home or flat or plot must be co-applicants in the home loan documents. The higher is the repaying capacity there more loan amount you are eligible for.
Sometimes people ask some other people to be co-applicant to increase the amount of loan they can borrow however, in this the co-applicant is also at risk of your non-payment of the home loan. He is also equally responsible for timely repayment of your home loan. The tenure for which you are applying for the home loan and the amount also determines your eligibility. Longer tenure may mean lessees EMIs hence you can borrow more amount for the same EMI.
How much Home Loan amount one can apply for?
In case you have identified the property, most financial institutions want you to pay ten to twenty percent of your home loan amount as down payment and they generally finance the remaining 80 to 90% of your property value. There are also other charges levied while processing your home loan like registration, transfer and stamp duty charges which are considered as part of the home loan amount.
Importance of Co-Applicant in Home Loan?
While applying for home loans, one must have a co-applicant for security reasons. Also, it is necessary that all the owners of the property must be applicants in the home loan documents. And in case you are the sole owner then you need to have your immediate family member as co-applicant to take the responsibility of repayment if something happens to you or you are not available for any reasons. Here is our complete guide on Whether to apply for a joint home loan.
Documents required for home loan
- A Identity Proof
- Salary slips for the last three months/bank statements for the last six months showing salary credits
- Latest form 16 and IT returns
- A crossed cheque
- Financial Institute’s Application Form and
- Declaration form stating the end use of the loan
- An approved plan for property construction
Some lenders may also require you to submit some collateral security like life insurance policies, or pledges of shares, or national saving certificates, your mutual fund unit’s certificate, bank deposit certificates and other sorts of investments.
Sanction of Home Loan
When you submit all the required documents, bank checks your eligibility and decides whether it will provide you with loan or not. Then once the bank has decided to sanction the loan to you they will pass a sanction letter which would include the loan amount, the tenure of your loan, the applicable interest rate for your loan with other terms of home loan. The terms stated in the sanction letter will be valid until the date mentioned in that letter before which you must give your consent to accept the loan or not under given conditions and terms.
Disbursement of Home Loan
When you accept the sanction letter, then the loan would be handed over to you that is the amount of sanctioned loan will be disbursed to you. After the acceptance of sanction letter, the bank carries out all the technical, legal and valuation exercises. One may also opt for lower loan amount against disbursement than what is mentioned in the sanction letter. At this stage, you will require to submit allotment letter, photocopies of the title deeds of your property, encumbrance certificate and agreement to seal the paper. The interest rate will be applicable as per the date of disbursement and not what is mentioned in the sanction letter.
Cost involves while availing Home Loan
When one applies for a home loan there are also certain processing charges which may vary for 0.5% to 1% of the home loan amount. Sometime lenders would just waive it off to acquire the customer. The processing fee is generally the amount the lenders must pay to its scrutinizing department to check the property and related document verification. When you borrow a home loan from the bank, this processing fee is part of the loan sanctioned or disbursed.
Should one get insured to cover Home Loan liability?
When you are covered by insurance, the liability of home loan does not fall on your family in your absence. There are various plans available to cover you under insurance for your home loans, which may cover both term insurance or mortgage insurance plans.
Can I avail Tax Benefit on Home Loan
Yes, under section 80C of Income Tax Act, you may avail tax benefit on the amount of loan you are paying. The total tax benefit you can avail should under INR 1.5 lakhs. This tax rebate is also applicable to people who are doing partial payments. In case you are the owner of the property then this rebate can be increased up to INR 2 lakhs. For more information and help with Home or Property loans, please contact our customer care number. Our experts can judge your particular case better and help you with the best loan options.
