Buying a home is one of the biggest financial decisions in life, and for most people, a home loan plays a key role in making that dream a reality. However, applying for a loan without the right knowledge can lead to confusion, delays, or even rejections. To make the process smooth and stress-free, here are the top 10 things you should know before applying for a home loan.
1. Check Your Credit Score
Your credit score is one of the most important factors lenders look at. A higher score (750 and above) increases your chances of getting approval with better interest rates.
- If your score is low, take steps to improve it—repay credit card dues, close unnecessary loans, and avoid late payments.
- A strong credit score not only increases approval chances but also helps you negotiate a lower interest rate.
💡 Tip: You can check your credit score free once a year on platforms like CIBIL or Experian.
2. Understand Your Loan Eligibility
Lenders calculate eligibility based on your income, repayment capacity, age, job stability, and existing liabilities. Knowing this in advance helps you apply for the right loan amount.
Don’t apply blindly. Lenders calculate eligibility based on your:
- Income & Job Stability (salaried vs self-employed)
- Existing Debts (like car loans or personal loans)
- Age (younger applicants get longer tenure options)
Use a Home Loan Eligibility Calculator online to get an estimate. Applying for more than you’re eligible for may lead to rejection.
3. Compare Interest Rates
Different banks and NBFCs offer different rates. A small difference in interest rate can save you lakhs over the loan tenure. Always compare before choosing.
- Public sector banks often have slightly lower rates.
- Private banks may offer faster processing but with higher charges.
- NBFCs can be flexible but may charge more.
💡 Example: A ₹50 lakh loan at 8% interest for 20 years means ₹24.8 lakh interest. At 7.5%, it reduces to ₹23 lakh—saving ₹1.8 lakh!
4. Know the Types of Interest Rates
- Fixed Rate – EMI stays constant. Good for those who prefer stability.
- Floating Rate – EMI changes with market fluctuations. It may start lower but can increase.
Some lenders also offer hybrid loans where the rate is fixed for a few years and then switches to floating. Choose the one that suits your budget and risk appetite.
5. Check Processing Fees and Hidden Charges
Apart from interest, lenders may charge processing fees, legal charges, or prepayment penalties. Always read the fine print before signing.
6. Choose the Right Loan Tenure
A longer tenure reduces your EMI but increases total interest paid.
A shorter tenure increases EMI but saves on interest. Strike the right balance for your finances.
💡 Example: A ₹40 lakh loan for 20 years @ 8% = EMI ~₹33,458. For 10 years, EMI ~₹48,485 but you save ₹19 lakh in interest.
7. Arrange for the Down Payment
Most lenders finance 75–90% of the property’s cost. The rest has to be paid by you as a down payment. Plan your savings accordingly.
- For a ₹50 lakh home, you may need to arrange at least ₹5–12.5 lakh upfront.
- Factor in additional expenses like registration, stamp duty, and interiors.
8. Get Pre-Approved if Possible
A pre-approved home loan gives you a clear idea of your budget and also makes property hunting faster and easier.
9. Verify Property Documents
Banks approve loans only for legally clear properties. Ensure the property has all approvals, clear titles, and meets RERA guidelines to avoid rejection.
Ensure:
- Title is in seller’s name
- Approvals from local municipal authority
- RERA registration (for under-construction properties)
- No pending litigation
💡 Tip: Get legal verification done before making token payments.
10. Know About Tax Benefits
Home loans offer tax deductions under Sections 80C and 24(b) of the Income Tax Act. This helps you save significantly while repaying your loan.
- Up to ₹1.5 lakh deduction under Section 80C (Principal Repayment).
- Up to ₹2 lakh deduction under Section 24(b) (Interest Repayment).
- Additional benefits for first-time buyers under Section 80EE / 80EEA.
This can reduce your overall tax liability and increase savings.
✅ Conclusion:
Applying for a home loan doesn’t have to be overwhelming. With the right preparation and knowledge, you can make smarter choices, save money, and move into your dream home faster.
✨ With careful planning and the right guidance, you’ll be one step closer to holding the keys to your new home!