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Monday, September 21, 2020

Home Loan Requirements

Buying a house is a long cherished dream for every Indian. If you have planned your finances well and are ready for the big commitment of repaying a Home Loan, search for good offers. Be ready with all necessary documents and get the loan.

Home Loan Eligibility

When you apply for a Home Loan, lenders look at various factors like your income, age, your credit history, and your savings and investments. They would expect you can spare around 45% of your income towards the EMI payments. 

Your Basic Loan Eligibility: Use a Home Loan eligibility calculator and EMI calculators to find the ideal amount you can get as loan given your current financial status. These tools are available online. You have to enter your income, your expenses, and your other EMIs if you are paying back other loans. You also have to enter the loan amount you're looking for, the ideal interest rates your would like etc. These calculators then subtract all your regular expenses from your income and then let you know the highest amount you can afford, and they also give you the EMI schedule that fits the terms you were looking for.

Co-Borrower: If the loan eligibility determined by these calculator tools is too small, consider bringing in a co-borrower, ideally your spouse. The income and financial status and credit status of co-applicant can together help you qualify for a much bigger amount.

Credit Rating: Your credit rating is an analysis of your usage of credit facilities, your track record in clearing them etc. Credit rating agencies like CIBIL collect this information on each individual who has ever used a credit facility like credit card, instalment plans, or availed loans. Lenders will always give priority to loan applicants who have a good credit rating.

Your Savings and Investments: If you have built up a good corpus of funds through your savings and your investments in instruments like Mutual Funds, lenders will look at your application more favourably. So provide proofs of your investments and savings along with your loan application.

If you are young and employed in a reputed company, your chances of loan approval increases. This doesn't mean that you will not get a loan if you are employed in a smaller company or if you are self-employed. If your finances are in good order and you have a good credit rating, you will be able to get a good Home Loan.

Read more Tips to Bring Down your Home Loan Interest Rate

Documents Required for Home Loan

When applying for a housing loan, you should be ready with all the required documents for Home Loan, to speed up the loan processing time. There is a standard set of documents required for Home Loan application. These may slightly differ based on whether you are salaried or self-employed.                                 
Here is a Home Loan documents list to guide you:

Common Documents

Whether you are salaried or self employed you have to submit documents for Photo Identity Proof, ID Proof, Age Proof, and Address Proof. But first, you will have to submit the duly filled-in Loan Application along with passport-size photos affixed.

For other proofs, provide at least one document from the given list for each.

For Photo Identity

- PAN Card
- Adhaar Card
- Voter ID
- Driving license
- Passport

For ID Proof

- PAN Card
- Adhaar Card
- Passport
- Voter ID
- Employee ID

Age Proof

- Birth Certificate
- PAN Card
- School Leaving Certificate
- Driving License
- Passport

Address Proof

- Adhaar Card
- Voter ID
- Passport
- LIC Policy
- Utility Bill (Gas Bill, Electricity Bill, Water Bill, Telephone Bill)

Other Documents Needed for Salaried Individuals

You need to provide proofs of employment and income.

For Employment Proof (One of the following)

- Employment Certificate for current job
- Appointment Letter for current job
- Experience Certificate (should include records of previous employments)

For Income Proof

  • Last 3 months salary slips
  • Last 6 months bank statement that shows records of salary received and also any EMI payments towards other loans
  • Form 16

Other Documents Needed For Self-Employed

You need to furnish a different set of documents for income proof and for business existence proof.

For Proof of Business Existence

  • A Brief and formal write up about the Business
  • Business Registration Certificate under Shops and Establishments Act/Factories Act
  • Tax registration certificate
  • 3 Years Old Saral Copy

For Income Proof

  • Last 1 year bank statement
  • Previous 3 years income tax returns
  • Past 3 years audited balance sheet
  • Past 3 years audited profit & loss statement
  • Receipts for advance tax paid (if applicable)

In case you are a self-employed professional, you also need to provide

  • Copy of professional degree certificate
  • Certificate of practice

Office Address Proof

  • Rent or lease agreement
  • Rent or lease receipts
  • Utility bills
  • If you own your office premises,

Office Ownership Proof

  • Property documents
  • Utility bills
  • Maintenance bills

Apart from all these, whether you are salaried or self-employed, furnish the following documents

  • Previous loan records Including loan sanction letter, repayment schedule, EMI payment records, loan closure proof etc.
  •  Proofs of all your savings and investments. These provide a record of your financial stability, and they are even more relevant if you are self-employed                                       

Research for loan offers with the lowest Home Loan interest rates. Apply for Home Loan after determining your loan eligibility, and ensuring that you will be able to make the required down payment on the house, and keep up with the EMI schedule. You then need to collect and organise all the documents and give them to the lender for the Housing Loan approval process. 

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