How to Get a Home Loan in India: Step-by-Step Process

Owning a home is one of the biggest achievements for an individual and this is why people work extremely hard to pursue this dream. Though people strive to buy a home, the continuous rise in property prices in India has made it harder for people to realize this dream. This is where taking a home loan emerges as the most feasible way to arrange funds for a home purchase. Another benefit of taking a home loan is that it can help in saving income tax. If you are looking to take a home loan, it is necessary to be aware of the home loan process in India, which would help you get a loan quickly and easily.

As the Indian economy is growing rapidly, the demand for home loans is increasing. The home loan market in India is estimated at USD 300 billion and is supposed to record a CAGR of 22.5%. Both the government and private institutions have come up with various affordable housing schemes in India that contribute to an increase in the number of home loan borrowers. 

As of the latest data (2023), the number of home loan borrowers in India has been increasing steadily due to the growing middle class, urbanization, and affordable interest rates. According to the Reserve Bank of India (RBI) and industry reports, India has around 80 to 90 million home loan borrowers.

Factors driving this increase include the government’s affordable housing schemes like Pradhan Mantri Awas Yojana (PMAY), tax benefits on home loans, and attractive financing options offered by both public and private banks. Additionally, there has been a rise in affordable housing projects, which has further boosted the demand for home loans across the country.

What is a Home Loan?

In simpler terms, a home loan is a kind of credit that is taken to purchase a residential property. Today, both public-sector and private-sector financial institutions provide home loans at attractive rates to individuals. Taking a home loan is a long-term commitment as most people choose a repayment period of 20 -25 years. However, it is entirely up to the borrower how quickly he chooses to repay the borrowed loan amount. 

How Does a Home Loan Work?

Before you file a home loan application to a bank or a financial institution, you need to keep certain documents ready for submission such as your identity proof, address proof, income proof, tax return statement, etc.

A clear sale deed, encumbrance certificates from the relevant Registrar’s office, and other pertinent documents like panchayat, municipal, or corporation approvals for construction, clear land conversion documents, etc. must all be accurate, according to the person who plans to purchase the property through a loan. The home loan story starts when the buyer approaches a selected financial institution for a home loan after obtaining these documents. 

What are the different types of home loans available in India?

There are different types of home loan available in India including:

Home Purchase Loan – This type of home loan is meant for people interested in buying a new or old residential property. The approved home loan amount can be up to 80-90% of the property’s worth, given the lender’s policies.

Home Construction Loan – As its name indicates, this type of home loan is given to individuals who want to build a new home. The loan amount would include the construction cost, and the lender releases the loan amount in multiple installments given the work progress.

Home Improvement Loan – This loan is for people looking to renew or improve their homes. The loan amount may include the cost of repairs, painting, or any other home enhancement overheads.

Home Extension Loan – This type of home loan includes the amount needed to upgrade a home. The amount is disbursed in installments according to the construction progress. It includes home extension expenses.

Plot Buying Loan – This loan pays out the money in installments based on the status of the construction for purchasing a plot and constructing a new house. It is appropriate for individuals and covers the cost of the land. 

Step-by-step Procedure To Avail A Home Loan

Below is a detailed step-by-step procedure of how to get a home loan or mortgage loan in India. Whether you want to buy a new property or a property available on resale, you can refer to the following home loan processes to stay aware of various aspects related to your home loan application. 

Eligibility Check

The first step of obtaining a home loan is to check your eligibility for the same. This is an important step as it can help you determine whether you can avail such a loan or not. All banks and financial institutions have certain loan eligibility criteria that must be met by the applicant to qualify. These criteria are set on the basis of various factors like age, credit score, income, and employment status. 

You can begin searching for the most appropriate home loan when you understand that your eligibility has been established. Before choosing a particular one, you can check the interest rates, costs, and other terms and circumstances of several housing finance schemes provided by different banks and financial organizations.

Submit The Application

Once you check and meet the eligibility criteria for the chosen home loan scheme, the next thing to do is to furnish the required documents and submit the loan application. These documents include

• Identity proof,
• Income proof,
• Address proof, and
• Property Documentation. 

The home loan application form would need details like your name, age, income, occupation, loan amount required, and property information. Before approving your loan application, the banks will also want to know about any previous credit cards or loans against your name. This ensures that you are not running under existing debts and can easily repay the borrowed amount.

The overall loan amount may be increased with the assistance of a co-applicant. If you are applying with a co-applicant, you both need to sign the application form and provide the documents of both applicants.

Documents Verification

After you submit the home loan application to the bank, it will verify the information given in the submitted documents. During the verification process, the bank or financial institution will check your credit score, income, employment details, and property details to determine your eligibility for the proposed loan amount. A physical inspection of the property may be done by the lender to ensure that it meets their criteria.

Loan Approval and Disbursal

After you provide the required documents along with the filled home loan application, the lender will start the loan approval process. The bank or financial institution will check your creditworthiness and property details. The loan approval process typically takes a few days or weeks given the lender’s internal loan approval procedures.

Once the submitted loan application is approved, you will get a sanction letter from the lender. The loan amount, interest rate, and repayment period will be mentioned in the sanction letter. Before signing, make sure you have thoroughly read the sanction letter and are aware of its terms and circumstances.

The lender will disburse the said loan amount once you have signed the sanction letter and fulfilled all the requirements. Depending on the internal processes of the lender, the distribution process often takes a few days to a few weeks.

Important Note:  Do keep in mind that taking a home loan is a long-term financial commitment. In the case of non-payment of the instalments, the bank or financial institution has the right to seize the property to recover the unpaid amount. Hence, it is necessary that you make timely repayment of the loan instalment every month. Also, don’t borrow a loan amount that is beyond your repayment capacity.

The home loan process in India has become quite easy in recent times due to online application and approval. However, loan approval and disbursal may take longer time due to the complexity of this financial product. Make sure you go through the loan document properly to avoid any misunderstanding later. This way, you say yes to a smoother home loan approval journey.

The Conclusion

When it comes to buying a home of your dreams, money remains the most intrinsic part of the buying decision. Since buying a home is a big-ticket financial decision, a home loan or mortgage loan in India emerges as the most preferred way of arranging money for the purchase. With several banks and financial institutions offering attractive deals on their home loan products, it has become a lot easier to choose a housing finance product that matches best your needs.

Experts recommend conducting thorough market research on all available home loan products and compare their interest rates in order to end up choosing the best offer. Some of the leading banks for home loans in India are SBI, HDFC, Axis Bank, ICICI, and PNB.