Home Loan 2024: A Detailed Home Loan Procedure Guide

Apr 13th 2024
Loan
Financing Your Dream: The Ultimate Guide to Home Loans 2024

Buying a home is a dream of many folks around the world. It is not just a dwelling to live in but it is also a status of a person’s success and maturity. This is why people want to invest their hard-earned money in a property they would love to showcase to others. Since a home is a high-value element, it is not easy for a person to buy a home outright. Instead, most people choose to take a home loan to finance their home-buying needs.

A majority of people think that to buy a home they need to take a loan and most of them consider it a liability. This is not the case every time. According to financial experts, a home loan is not a liability but a wonderful opportunity to enjoy several benefits. Yes, not many people know but buying a home loan comes with loads of benefits. In this post, you will get to know each one of them understandably.

What is a Home Loan? 

A home loan is considered a secured loan which is availed by a person to finance a home. In a home loan, the property purchased works as collateral against the home loan. As compared to other types of loans like personal loans, car loans, bike loans, and business loans, a home loan comes at much-reduced interest. The home loan is repaid by the borrowers in the form of equated monthly instalments (EMIs) for the chosen loan tenure.

Importance of Home Loans in Real Estate

Home loans play a crucial role in the real estate market as they enable people to purchase homes, fulfilling their need for shelter. Additionally, they involve a significant financial commitment, making it possible for individuals to achieve the milestone of homeownership. 

  • Home loans provide crucial financial support for first-time home buyers, offering the opportunity to enter the real estate market without having to save a massive amount of money for a house. This allows individuals to secure their dream home much sooner than if they had to wait to accumulate the entire purchase amount. 
  • Home loans frequently offer flexible down payment options, which can greatly benefit first-time home buyers, particularly those who may not have significant savings but can manage monthly EM payments. This accessibility can make it easier for individuals to enter the housing market and achieve their homeownership goals. 
  • First-time homebuyers can take advantage of tax benefits associated with homeownership, as interest paid on home loans is often tax-deductible. This can lead to a potential reduction in taxable income and provide an opportunity to optimize their financial situation. 
  • One of the key benefits of owning a home is the ability to gradually build equity. As you make mortgage payments, the amount of the home that you truly own increases. This equity can then be utilized for things like home renovations or as collateral for other financial purposes., 
  • Home loans provide stability and consistency in monthly payments, unlike renting. Fixed-rate mortgages, especially, offer a reliable and predictable payment amount. This stability allows first-time buyers to effectively budget and confidently plan for the future. 
  • Real estate has a long history of appreciating, making it a valuable long-term investment. Purchasing a home through a mortgage allows first-time buyers to not only secure a place of their own but also potentially benefit from future increases in property value. This appreciation can play a crucial role in building long-term financial stability. 
  • Home loans offer a range of terms and conditions, catering to the diverse financial goals of first-time buyers. Whether it's flexible rate mortgages providing adaptability or fixed-rate mortgages offering stability, there are options to customize the loan according to individual preferences.
  • Having a successful track record of managing a home loan can significantly improve your credit history. Timely EMI payments exhibit financial responsibility and can boost your credit score. Positive credit history is essential for upcoming financial activities and can lead to more favourable terms for future loans.
  • First-time homebuyers often experience a strong sense of pride and accomplishment after overcoming the challenges of obtaining a home loan. This emotional investment in their property can lead to a greater sense of community and belonging, as they take pride in having a place to call their own.
  • Homeownership is indeed a great long-term investment, offering the potential for wealth accumulation as property values appreciate. First-time buyers can benefit from this appreciation while also using the property as a valuable investment asset. By leveraging the property, homeowners can explore various financial opportunities beyond the initial purchase, making it a wise investment choice.

Also Read: Role of Credit History in Home Loan Approval

What Are The Major Benefits Of Taking Home Loan?

Now, comes the main point – the benefits of availing a home loan. From getting attractive interest rates to improving the CIBIL score, and availing tax benefits, there are numerous benefits of securing a home loan in today’s times. In this post, we will cover each of them in the following section’.

  1. Affordable Interest Rates: As already mentioned, a home loan is a secured loan which means one can get it at attractive interest rates. A home loan is always affordable than other types of loans particularly a personal loan which comes at much higher interest rates. Lower interest rate means lower EMIs that make home buying much more affordable.
  2. Attractive Property Rates: In today’s fast-paced world, property buyers can enjoy numerous options in the home loan category. For example, they can enjoy dual – the borrower can choose to buy a bigger home or buy a property at a lower price than what was planned. The next point is that the borrower can relish other perks of buying a home with a home loan like tax savings, lower down payment in the beginning and taking a top-up loan, prolonged loan repayment period, etc.
  3. GST Benefit: You should be happy to know that the GST (Goods and Services Tax) rates against the buying of a property have been reduced significantly by the government of India. At present, there is zero input tax credit (ITC) levied and the GST rate on the acquisition of residential properties is 5%. A borrower can benefit from these lowered interest rates and buy a property now.
  4. CIBIL Improvement: Since a home loan is a secured loan, many people take it to improve their credit score (CIBIL). If you have a low CIBIL score and are unable to get a personal loan, you prefer to take a home loan at attractive interest rates as the property would be placed as collateral. By sensibly paying your home loan EMIs, you can increase the likelihood of your Cibil Score Improvement Agency.
  5. Tax Savings: Tax Savings mean, that if you file ITR every financial year, you can become eligible for a deduction in the claim for the overall home loan amount interest deposited under Section 24B of the Income Tax Act.
  6. Balance Transfer Facility: If you already have a running home loan from a bank or a financial organization where you have been paying higher interest rates, you can choose to transfer that home loan to another lender and avoid paying higher interest rates in the form of surged EMIs.
  7. Rent Savings: For those who have been paying exorbitant rent for months and years on a rented property, it is advisable to buy a property to save that money and pay the home loan EMIs. Most experts recommend buying a property rather than living on rent.

Check your Credit Score for Free Now

How To Apply For a Home Loan?

In a country like India, banks and other financial organizations offer home loans to borrowers at affordable interest rates. Though every bank has its home loan application procedure, most of them follow a common procedure when it comes to applying for a home loan.

For those looking to avail of a home loan, it is necessary to know that applying for a home loan has become extremely easy in today’s digital times. For example, you can apply for the same by visiting the bank branch, visit the bank website, or even download a mobile app.

Below is the process to Apply for Home Loan today.

Step 1:- Fill out the application form for a home loan

Start with filling out the home loan application form. Most banks have an easy-to-understand application form that can be either filled through the bank visit or applied for a home loan digitally. The following details will be submitted:

  • Name
  • Address
  • Contact details – phone number and email ID
  • Education
  • Type of employment – salaried or self-employed
  • Annual Income

Step 2:- Paperwork

After you provide the basic information, you will need to attach the below documents for verification:

  • Identity proof – PAN card/ Aadhar Card / Voter ID/ Driving license
  • Address of proof – can be a copy of any utility bill
  • Salary slips of the last 3 months
  • Proof of employment
  • Bank statements for the last 6 months
  • Form 16

Step 3: - Verification

Home Loan Verification Process, Your application for a home loan is started processing by the bank the moment you submit the form and all the necessary documents. The bank will go through every submitted document. To get this done, a bank representative could even come to your office or existing residence.

The following stage is to determine whether you are a creditworthy borrower. The bank thoroughly investigates your credit report. Consequently, you must keep a solid credit history.

The bank will move on with processing your loan application if all of your paperwork is in order and you have acceptable credit information and a score.

Step 4: - Loan Sanction

The bank will furnish the borrower with a sanction letter after your home loan application has been approved. This letter is used as evidence for loan authorization. This letter includes all relevant information on the loan transaction like interest rate, loan account statement, loan tenure, monthly EMI, foreclosure charges, etc.

Step 5: - Loan Disbursal

The submitted home loan application will be accepted if the bank is okay with all the formalities. A letter of final agreement will be sent to you. You will receive a welcome package and a detailed home loan EMI schedule when the loan has been disbursed.

Also Read: Credit Report Vs Credit Score

Tips for Choosing the Right Home Loan

Read these tips before applying for a home loan to simplify the process and repay the loan more easily.

  • Research thoroughly before applying for a home loan, focusing on down payment, EMIs, and repayment tenure to choose a suitable loan and lender. Explore all the details including the nitty-gritty.
  • Consider affordability before applying for a home loan. Besides the monthly EMI, account for overhead expenses and have a steady income for emergencies. Affording the loan is important when choosing a house.
  • After getting a home loan, it's important to stick to a budget, pay the EMIs regularly, and avoid delaying or missing payments. This will help maintain credibility and prevent higher interest rates. To avoid spiralling into debt, prioritize timely repayment and be cautious with spending. This controlled approach will enable you to pay off the loan sooner.
  • EMI amount depends on you, banks offer varied options. EMIs also depend on a down payment. A bigger down payment means less stress. The chosen EMI amount should not exceed 45% of total income.
  • Repaying the loan takes time, which is called repayment tenure. Longer tenure means smaller EMIs but higher interest rates, resulting in paying more. If income is stable and the budget is strict, choose a shorter tenure with higher EMIs and lower interest rates.
  • Maintaining a good credit score is crucial for applying for loans in the banking sector. Having a CIBIL Score above 750 allows for better interest rates on home loans and faster loan processing.
  • Being aware of RBI norms can benefit you in multiple ways. Repaying your home loan early helps you avoid additional expenses and improves your credit score.
  • Check eligibility before applying for a home loan. Credit history documents are important. 
  • Discuss additional charges with the lender before applying for a loan. Consider one-time or monthly charges in monthly financial planning.
  • Please carefully review the agreement documentation for a thorough understanding of the loan application process. We strongly recommend that you read the necessary documents before signing the loan papers to ensure your satisfaction and establish long-term trust.

The Conclusion

Be it any residential property, taking a home loan is undoubtedly a reliable way of arranging funds for property buying. This way, you can buy your dream home easily and quickly. Today, all major banks and financial organizations offer attractive interest on home loans. All you can do is compare all the home loan options and choose the one that matches your needs the best.

 

subscribe

Subscribe to our newsletter

Reach out to our Experts if you have any Doubts

Like the best things in life, Consultations @InvestKraft are free

Drop a Mail or give us a Missed Call & Begin your Investment Journey here

subscribe

Subscribe to our newsletter