How to apply for home loan| North Loop Official Blog
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23 Sep 2020

How to apply for home loan

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From Luxurious and sophisticated mansions flaunting chic interior and private infinity pools in the Beverly Hills to old fashioned quasi-rural cottages lost within the helm of nature, somewhere far far away, everyone dreams of owning a house.
But being one of the most coveted assets a person can own, one would need to assess the feasibility and plan their finances accordingly.

The introduction of flexible home loans and affordable housing schemes have helped millions of people realize their dreams of owning a home. Given below are the various types of home loans offered by major banks in India-

What is a Home Loan?

Home loans are the credit-based financial instruments issues by Banks or NFBCs to borrowers. These loans serve the purpose of financing a house, which is repayable in the form of installments or as a whole by the borrower in exchange for an interest amount set in place by the bank.
The interest amount charged by the banks are a source of income for the banks.

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Types of Home Loans-

  • Home Purchase Loan: A home purchase loan is a type of home loan availed for the purpose of purchasing a house.

  • Home Improvement Loan: Home improvement loan is the type of home loan availed for the purpose of improving/renovating a house.

  • Home Construction Loan: Home construction loan is a type of loan availed for the purpose of constructing a house.

  • Land-Purchase Loans/Plot Loans: Home purchase loans/ plot loans are availed for the purpose of purchasing land or a plot, which later can be used as an asset or for the construction of a house on that plot/land.

  • Home Extension Loan: Home extension loan is the type of loan availed for the purpose of extending a specific portion of a house, like an additional room, floor, etc.

  • NRI Home Loans: NRI Home loans are the type of home loans availed by Non-Resident Indians for the purpose of constructing a house or renovating an existing one.

  • Home Loan Balance Transfer: Home loan balance transfer is usually availed by individuals who want to transfer an existing home loan from a bank/NBFC to another bank, either to club all loans into one or for a lower interest rate.

Current Home Loan Interest Rates-

The current home loan interest rates offered by major Banks in India are heavily dependent on the guidelines set in place by the RBI (Reserve Bank of India) and the Financial Ministry, subject to change every year.
Home loan interest rates have been linked to an external benchmark by the RBI known as the Repo Rate. Repo Rate is the benchmark set in place and anything higher that banks charge on loans is known as the Repo rate + margin.

Banks also tend to charge a varying rate of interest on loans depending on an individual’s creditworthiness, linked to a government-approved credit score system known as the CIBIL score. If the banks perceive an individual to have a higher risk of repayment, the interest rates charged are relatively higher than other individuals.

Given below are home loan rates offered by different major national banks in India-

Home Loan Rates offered by banks in India-

Current Home Loan Rates offered in India
Bank NameInterest RateAmount of Loan Sanctioned
State Bank Of India (SBI)7% - 9.65%Upto Rs. 5 crores
HDFC Bank6.95% - 8.20% Upto Rs. 10 Crores
AXIS Bank7.75% - 8.40%Upto Rs. 5 Crores
Kotak Mahindra Bank7.20% - 9.30%Upto Rs. 10 Crores
Punjab National Bank7.15% onwardsUpto Rs. 1 Crore
ICICI Bank6.90% - 8.05%Upto Rs. 3 Crores
Yes Bank8.95% to 11.80%Upto Rs. 5 crores
Bank Of Baroda6.70% onwardsUpto Rs. 5 Crores
Canara Bank 6.90% - 8.90%NA
IDBI Bank7.40% - 8.00%NA

Eligibility Criteria for Home Loans-

In the case of Indian Residents, one is required to be a minimum of 20 years and up to 70 years for a home loan to get sanctioned, with a minimum salary of Rs. 25,000 per month or Rs. 2.4 Lakh per annum conventionally. At least a minimum of 2 years work experience is required in the case of salaried employees and a minimum of 3 years work experience is required in the case of self-employed individuals (varies from bank to bank). Banks also expect good CIBIL scores, with a minimum score of 700. Up to 90% of property value can be sanctioned as a loan.

In the case of Non-Resident Indians, Person of Indian origin (PIO), Overseas Citizen of India (OCI), one is required to be at least 20 years of age, with over 2 years of experience (including overseas experience), minimum salary varies from country to country and bank to bank.

Banks also check the relevant credit scores and the individual is required to have a good credit score for the same.

Documents Required for home loans in the case of Indian residents

Conventionally, these are the documents required for home loans for Indian residents-

  • Employer Identity Card

  • Loan Application: Completed loan application form duly filled in affixed with 3 Passport size photographs

  • Proof of Identity (Any one): PAN/ Passport/ Driver’s License/ Voter ID card

  • Proof of Residence/ Address (Any one): Recent copy of Telephone Bill/ Electricity Bill/Water Bill/ Piped Gas Bill or copy of Passport/ Driving License/ Aadhar Card

Property Papers-

  • Permission for construction (where applicable)
  • Registered Agreement for Sale/ Allotment Letter/ Stamped Agreement for Sale
  • Payment Receipts or bank A/C statement showing all the payments made to Builder/Seller

Account Statement-

  • Last 6 months Bank Account Statements for all Bank Accounts held by the applicant/sIf any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year

Documents Required for home loans in the case of NRIs-

Documents Required for NRI Home Loans (Requirements can vary depending on the bank)

  • Passport

  • Work visa copy

  • Proof of valid work permit

  • Employment contract copy

  • Current proof of residence

  • Salary slips of past 3 months

  • Salary account statement for the past 6 months

  • Property papers of the NRI

How to Apply for a Home Loan -

Given below is the procedure to apply for a loan-

Step 1- Application: The first step would be to apply for a home loan. This can be done online or at bank branches or at loan centers.

Step 2- Loan Sanction: Post submission of your application and review of necessary KYC and documents of financial stability, the bank sanctions the loan amount.

Step 3- Review: Once the loan is sanctioned, applicants are required to submit the documents pertaining to the property against which the applicant’s loan is sought, for technical and legal review.

Step 4- Approval & Disbursal: Upon validation of the applicant’s loan amount and the property papers, the bank shall approve and disburse the loan.

Home Loan Calculator-

You can use our Home Loan Calculatorto calculate your installments including the interest amount on the principle amount sanctioned here.

Before applying for Home Loans, we advise our readers to first assess the feasibility of a house and to undertake meticulous financial planning before taking a decision of availing a loan. You can also calculate your monthly outgo in the form of installments with our calculator mentioned above.

North Loop offers comprehensive fin-tech solutions for individuals in financial predicaments. Personal loans, new immigrant loans, overdraft on fixed deposits, credit lines, credit cards, education loans- North Loop offers it all with some not even requiring a credit history.
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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.