How To Get A Home Loan?

"Can I get a 100% home loan?"
"How much home loan can I get in India?"
"What are the Documents Required for SBI Home Loan Application?"

Are all these questions running all over your mind like a thorough-bred steed at a Kentucky Derby? Do you want a home loan buy don’t know where to start? 

If that’s your problem, fret no more! In this article from mymoneykarma, we’ll answer all your questions one by one.  

But first, we need to get down to the basics...

How to get a home loan?

Want to borrow money? You need to apply for a loan.

Want to buy a dream home but don’t have the funds on hand? Not a problem; just get a home loan!

One thing to remember is that home loans require a longer list of documents compared to other loans. This means that the application process can be a bit longer than what you may be used to.

For getting a home loan, here are few criteria and points to remember:

Credit and Income

Your income and credit are primary factors for getting most forms of loans. As such, these have a lot of weight behind whether your application gets accepted or not. So, before you take time to apply for a home loan, its is more prudent to check your credit score.

In case you do find that there are problems like late payments which marr your credit score, take steps to correct them first. In such circumstances, the loan can wait. 

In fact, with a damaged credit score, you may get disapproved anyways. Even if you are approved by any chance, you’ll be sure to get a loan with a large, fat interest rate! Is it not better to apply with a good credit score?

Did I hear a ‘yes’? Great!

Some issues you want to look for in your credit report are late payments and delinquent accounts. If there are instances that you can dispute, do so. 

Documentation

Like we said above, you need more documentation for getting a home loan than any other form of credit. The main reason for this is that lenders have to be sure that you have the means to repay the loan on time. For this, you’ll need to provide adequate income proof, the most recent tax return record, along with other documents as may be needed. 

Debt-to-Income ratio

One thing your potential lender shall certainly look at is your debt-to-income ratio. This is to ensure that you’ll have enough cash in hand to cover each loan installment. They’ll take into account your existing loans and the one you wish to take. This lets them know how much of your monthly income is eaten by loan repayment EMIs.

Loan-to-Value Ratio

It is certainly possible to get a loan with a small down payment amount, but you are more likely to get your application accepted if you make a big down payment. Lenders see how much money you are borrowing in comparison to the net worth of your property. In conclusion, it means that the lesser the amount of money you borrow, the lower the risk to the lender, since smaller loans are easier to repay. 

Pre-approval

It is a good idea to know how much can can really borrow even before you start applying. It’ll increase your chances. For this, you may want to get pre-approved by a lender. In this preliminary process, your income and credit information is evaluated. 

With this information in hand, lenders can give you a rough estimate of the maximum home loan amount which you can get. While it doesn’t mean that your application gets approved, pre-approval loan information is certainly useful.

How much you should borrow

In their eagerness to give you a home loan, lenders won’t be inclined to tell you just how much you should borrow. At the end of the day, it is your responsibility as a borrower to find out:

• How much you should borrow

• What type of loan you should take

• How much of a down payment you should give

• How much you should really spend on the home you want to buy

All of these are central to determining your Loan-to-Value Ratio. These dictate how much your EMIs will be over the loan’s life.

To conclude, a small loan is easier to pay off, as the monthly payments and interest charges are smaller. You can borrow the maximum possible amount, but be aware that it’ll be more risky.

We have just seen what the criteria for getting a home loan are, and how much loan you “should” take. We’ll now come to arguably the most important section, in which you’ll find out where you can get home loans from.

From where can you get a home loan with ease?

You can get home loans from a number of sources. For best results, consider getting a quote from three different sources. Consider all three and pick the one that suits you the most.

Here are your options: 

• Mortgage brokers: One of the greatest benefits of approaching a mortgage broker is that you can get home loan quotes from various banks and lenders. Thus, they give you access to multiple sources of finance, along with giving you several other important benefits. 

How do mortgage brokers get paid? They either charge you a fee, or charge the lender, or charge both. In case you don’t know a mortgage broker personally, ask others like real estate agents for recommendations.

• Credit unions and banks: These sources offer attractive loans, including home loans. They loan out amounts, or rather invest them, to you. This is one way they can earn from their funds from various savings and checking accounts. Apart from the loan’s interest, they also earn from closing costs and origination fees.

• Online lenders: They earn from investor funds by lending them. The services of online lenders are convenient as you can get instant quotes. You are also able to handle all the activity online.

Your other loan sources are: 

• Loan programs: Sometimes, local organizations and the government can help you in getting the home loan you desire, with certain loan programs. These programs enable you to get approved for the loan without much hassle. They also make owning a home more attractive and affordable for many.

• Government loans: Government loans are the most generous. In this case, you get a loan from a private lender. In case you fail to repay, the government will pay the lender instead of you.

• First-time home buyer program: If you are buying your first home ever, there’s great news. There is something as first-time home buyer program. These programs make it easier to get a home loan. Developed by non-profit organizations and local governments, these facilitate loan approval, down payments, interest rates, etc.

The downside is that these are hard to find and even to qualify for. Furthermore, all of these loans limit the profit you can make from the sale of your home.

That was all the essential background information that you’ll need. A bit too much, was it? Perhaps, but you can’t deny the fact that it is useful and important.

Let us now answer some of the most commonly asked questions.

FAQs

Can I get a 100% home loan?

Some banks offer as much as 90% of the total value of the property. However, it is also important to know that Loan-to-Value ratio is decided according to the RBI guidelines.

Here’s how it works: you get 90% of the loan financed if the amount is upto Rs. 30 lakhs, 80% of the total loan amount is the loan is between Rs. 30 lakhs and Rs. 75 lakhs, and only 75% of the total loan amount when the loan is above Rs. 75 lakhs. This ensures that the major part of the borrower’s funding is met.

How much home loan can I get in India?

In general, you may get 85% of the total loan amount against the property’s value. However, banks may also look at other criteria apart from the property’s value.

Here is a very helpful article that includes the home loan interest rates of the top 10 banks in India. mymoneykarma sources your home loan from across banks, so that you get the best interest rate out there.

What are the Documents Required for SBI Home Loan Application?

SBI is one of the best options for a home loan in 2022, with the lowest interest rate, of 7.90%. Some of the documents you’ll need to submit include the loan application form, three passport-sized photos, ID proof such as Voter ID card, driver’s license, Adhar card, etc, and your proof of residence. 

To Sum Up

We have learned in this article from mymoneykarma:

1. How to get a home loan

2. Criteria for getting a home loan

3. Where you can get a home loan with ease

4. Where you can get a 100% home loan

5. How much home loan can you expect in India

6. What the documents needed for a home loan are

We hope that this article will be helpful to you when it’s your turn to get a home loan.