Things to Consider Before Taking a Home Loan for First-Time Buyers

Things to Consider before applying for Home Loans:

1. Payment of Interest on Home Loan 

Comparing financial institutions is important in order to find a good deal when you want a Home loan for buying house at lower interest rate , choosing between floating rate and fixed rate is equally important.

Floating and Fixed  

Floating interest rates on Home Loan will adjust depending upon changes made by Reserve Bank of India (RBI)in its prime lending rate as well as general economic trends worldwide; whereas fixed rate of interest won’t change anymore once an agreement is made.

When it is anticipated that interest rates may drop in the future, financial experts advise choosing the floating rate of interest. Long-term savings are made possible by floating rates, which are typically 1%–2% less than fixed rates. 

When the state of the economy suggests that interest rates will increase, the latter choice makes sense. If borrowers choose a fixed interest rate, they can relax more and plan their budget more confidently. It is advisable for the applicant to select between fixed and fluctuating interest rates, considering their comfort level with the subsequent installment payments. 

2. Tenure for Home Loan

The repayment of the mortgage loan can reach 20 years, which means 240 installments. Long tenure is better for monthly savings as it eases EMI burden. A shorter period is suitable for saving interest payments, because it is calculated for a shorter period. For example, a home loan EMI of Rs 80,000 taken for 15 years at 8.25% p.a. is Rs.77,611. The total interest is Rs.59,70,000. 

If the repayment period is extended to 20 years, the installment comes down to Rs 68,165 but the interest goes up to Rs 83,59,760. Individuals can use the Home Loan EMI Calculator before applying. Care should be taken to ensure that installments do not exceed 30 percent of disposable income.

Lenders offer only part of the value of the property as a loan, and applicants must be responsible for the rest. This percentage can vary from 75% to 90% depending on the price of the property and the eligibility of the applicant. The borrower can either pay the minimum amount as a down payment or voluntarily pay more. Applicants should be careful about the amount they want to use as a loan and what they want to pay the builder or seller from their savings. A large down payment increases the chances of getting a home loan. Therefore, individuals can opt for a higher contribution if possible. It also eases their repayment burden. Regarding eligibility, individuals should also check if they are eligible for pre-approved mortgage offers. They speed up the application process by reducing requirements. Such offers are available on several other financing options, such as home loans. Prospective applicants can enter their name and phone number to view their pre-approved offer. 

4. Associated Costs for Home Loan

Interest is not the only cost associated with a Home Loan. Borrowers must also consider processing fees, late fees and foreclosure costs. These must be clarified with the lender immediately. Individuals may also note that foreclosures or prepayments only apply to fixed rate mortgages. Therefore, this is also a factor that must be taken into account when deciding between a fixed and a variable interest rate, because prepayment is one way to shorten the term and save on fees. 

5. Credit Score for Home Loan

A home loan seeker must also confirm the credit score before applying. A credit score that is high, say from about 750 and above, supports a lower interest rate method of financing. It is advisable that before you take a home loan, make sure that you pay all other debts first and look on strategies to have a good credit report in the next few months. 

One should also check what documents are needed and carefully read the loan agreement before applying for it. The decision to take a Home Loan is quite significant as it may affect the borrower’s financial life in the long-term. So, all. So, all the terms and conditions should be understood well before deciding to go ahead.  

Key Points To Remember when you apply for Home Loans:

• Look into the banks that provide the most affordable home loans. 
• Before beginning the home loan application process, carefully review the bank’s eligibility requirements. 
• Have copies of your ID, proof of address, proof of employment, and other documentation on hand. 
• Avoid falsifying any of the documentation as this will lead to significant issues. 
• Make sure you have the original paperwork when you meet with the bank representative in person. 
• The applicant may not be able to borrow a larger amount simply because they are qualified for a home loan. 
• Negotiable interest rates apply. Thus, always make the most of this chance. 
• Processing the loan, doing a reality check, estimating the site, and other administrative tasks come at an additional cost. 
• Throughout the valuation and verification process, do not omit any steps. 
• Before signing, carefully read over each loan document. 
• The original property documents are given to the bank upon loan approval, and they stay with them until the loan is paid in full. 
• Assuming the applicant’s documents are valid, the home loan application process typically takes two weeks to complete. 

Eligibility Criteria for Home Loan: 

The eligibility criteria for home loans have common parameters for all banks and non-banking financial companies (NBFCs). However, there may also be specific criteria that apply to each lender depending on their requirements. Understanding the criteria required to be approved for a home loan will help make the application process smoother and easier for you. 

Note: Home Loan eligibility criteria differ depending on the bank/lender. Approvals are based on the borrower’s income, credit profile, and existing relationship with the bank. One can find out their eligibility for Home Loans through the Home Loan Eligibility Calculator available in the online portals of Banks. 

Age	18 – 70 years
Income	Rs.25,000
Credit Score	Above 750
Employment Status	Salaried or Non-Salaried
Work Experience	2 Years
Loan Amount	Decided by the lender
Residence Type	Permanent resident or Non-resident Indian (NRI)
LTV(Loan to value) Ratio	Up to 90%
Property Type	Completed /Under Construction Project, Land/Plot, build on own Land, Buy Land and Build Home

Note: Home Loan eligibility criteria differ depending on the bank/lender. Approvals are based on the borrower’s income, credit profile, and existing relationship with the bank. One can find out their eligibility for Home Loans through the Home Loan Eligibility Calculator available in the online portals of Banks. 

Home Loans Interest Rate of all Banks 2024:

Banks	Starting Interest Rate (p.a.)	Processing Fees
Kotak Mahindra Bank	8.70% p.a. onwards	Salaried: 0.5% Plus taxes; Self-Employed/Commercial: 1.0% Plus taxes.
Union Bank of India	8.35% p.a. onwards	0.50% of the loan amount.
Bank of Baroda	10.15% p.a. onwards	No processing fee; discounted upfront fee.
Central Bank of India	8.50% p.a. onwards	0.50% up to Rs.20,000 Plus GST (waived till 31 March 2024)
Bank of India	8.30% p.a. onwards	Nil
State Bank of India	8.50% p.a. onwards	0.35% of the loan amount plus GST.
HDFC Home Loans	8.70% p.a. onwards	Up to 0.50% or Rs.3000 Plus taxes, whichever is higher. Minimum retention: 50% or Rs.3000 Plus taxes, whichever is higher.
LIC Housing Finance	8.35% p.a. onwards	For amounts up to Rs.1 crore, it is 0.25% of the loan amount, with a maximum of Rs.15,000 plus GST. For amounts above Rs.1 crore and up to Rs.2 crore, the fee is Rs.20,000 plus GST. For amounts above Rs.2 crore and up to Rs.5 crore, the fee is Rs.25,000 plus GST. For amounts above Rs.5 crore and up to Rs.15 crore, the fee is Rs.50,000 plus GST.
AXIS Bank	8.75% p.a. onwards	Up to 1% or min. Rs.10,000 Plus GST
Canara Bank	8.40% p.a. onwards	0.50% of the loan amount.
Punjab & Sind Bank	8.50% p.a. onwards	0.15% of the loan amount will be charged, with a minimum of Rs.1,000 and a maximum of Rs.3,750. For loans above Rs.25 lakh and up to Rs.50 lakh, the fee is 0.25% of the loan amount, capped at a maximum of Rs.12,500. Similarly, loans above Rs.50 lakh but less than Rs.75 lakh incur a fee of 0.25% of the loan amount, with a maximum limit of Rs.15,000. Loans of Rs.75 lakh and above carry a charge of 0.25% of the loan amount.
IDFC First Bank	8.75% p.a. onwards	Up to 3% of the overall loan amount.
Bank Of Maharashtra	8.35% p.a. onwards	No processing fees.
Punjab National Bank	9.40% p.a. onwards	Nil
IDBI Bank	8.40% p.a. onwards	0.50% (Rs. 2,500 – Rs.5,000)
HSBC Bank	8.45% p.a. onwards	1% of loan amount or Rs.10,000, whichever is higher.
Karur Vysya Bank	9.00% p.a. onwards	Loans up to Rs.25 Lakh incur a charge of Rs.2,500 Plus GST.Loans ranging from Rs.25 Lakhs to Rs.50 Lakh carry a processing fee of Rs.5,000 Plus GST.For loans exceeding Rs.50 Lakh, the processing fee is Rs.7,500 plus GST.
Saraswat Bank Home Loan	8.60% p.a. onwards	Up to Rs.35 lakh: NIL Nl
		Rs.35 lakh – Rs.50 lakh: 0.30% of loan amount
		Rs.50 lakh – Rs.70 lakh: 0.40% of loan amount
		Rs.70 lakh – Rs.1.40 lakh: 0.50% of loan amount
Jammu & Kashmir Bank	8.85% p.a. onwards	0.50% Plus GST (min. Rs.2,000 and max. Rs.50,000)
South India Bank	8.35% p.a. onwards	0.50% of the loan amount plus GST
Federal Bank	8.80% p.a. onwards	0.50% of the loan amount with a minimum of Rs. 10,000 and a maximum of Rs. 20,000.
Standard Chartered Bank	8.60% p.a. onwards	Contact the bank
Karnataka Bank	8.75% p.a. onwards	Contact the bank
Sundaram Home Finance	Contact the bank for information on the floating/variable interest rate linked to market lending rates.	Up to 0.75% of the loan amount plus applicable GST.
Dhanalaxmi Bank	9.35% p.a. onwards	Up to 2.5% subject to minimum of Rs 1,250
Tata Capital	8.70% p.a. onwards	2.00% p.a. plus GST.
Tamilnad Mercantile Bank	8.60% p.a. onwards	0.50% of loan amount Plus GST
Bandhan Bank	8.65% p.a. onwards	Contact the bank
Yes Bank	9.40% p.a. onwards	1.5% of the loan amount plus GST or Rs.10,000, whichever is higher
Hudco Home Loan	9.25% p.a. onwards	Nil
Indiabulls	9.30% p.a. onwards	0.50% onwards
Aditya Birla Bank	Contact the bank	Up to 1%
GIC Housing Finance	8.80% p.a. onwards	Rs.2,500 Plus Applicable GST
Shriram Housing	9.50% p.a. onwards	Up to 2.5% of the loan amount Plus applicable taxes.
India Shelter Finance	12% p.a. onwards	Contact the institute.

Government Programs in India for First-Time Home Buyers for Home Loans:

Government Schemes:

1. Pradhan Mantri Awas Yojana (PMAY)

The Central Pillar: The cornerstone of the government’s affordable housing mission is PMAY (“Housing for All”), which aims to make homes attainable for every Indian by 2022. 

Credit Linked Subsidy Scheme(CLSS): The core of PMAY is CLSS, which provides first-time homebuyers with a sizeable upfront interest subsidy on their mortgages. This results in much smaller monthly payments and lighter overall loan obligations.  

Eligibiity Criteria: PMAY focuses on particular income brackets: Up to ₹3 lakhs in annual household income is the Economically Weaker Section (EWS).Lower Income Group (LIG): Family income in the range of ₹3-6 lakhs per year. Household income in the Middle Income Group (MIG I) ranges from ₹6 to ₹12 lakhs annually. Household income in the Middle Income Group (MIG II) ranges from ₹12 to ₹18 lakhs annually. 

PMAY’s Reach: The program goes beyond financial support to subsystems that focus on areas such as slum rehabilitation, promoting public-private partnerships for affordable housing, and providing beneficiary-led construction opportunities.

2. Tax Benefits for First-Time Home Buyers 

Tax relief: The Income Tax Act offers tax incentives specifically designed for first-time home buyers to ease the financial aspects of buying a home. 

Section 80C: Claim a deduction of up to ₹ 1.5 lakh from your taxable income towards the principal amount of home loan repayments. 

Section 80EE: If you are buying a first-time home, you can claim an additional deduction of up to ₹ 50,000 on home loan interest. 

Section 24: This section gives you a deduction of up to 2 lakhs on your home loan interest. 

3. Other Relevant Schemes for Home Loan 

Regional Support: Many states across India have launched their own programs to complement the central government’s systems. They may offer additional benefits such as reduced stamp duty (a tax levied on property transactions), special subsidies for certain groups and other local incentives. Research programs for your chosen location. 

Other Important Considerations for Home Loans

Understanding Compatibility: Carefully study the detailed compatibility requirements for each system. Factors such as income level, location, asset information and even marital status can affect whether you qualify. 

About interest rates: Getting the best deal on your Home Loan is very important. Compare interest rates, processing costs and repayment terms from different banks and financial institutions. 

The Property Factor: While the systems help financially, choosing the right property is just as important. Research the builder’s history, permits, location and overall build quality before deciding. 

Government schemes provide a valuable support system to first-time home buyers in India. By understanding the subsidies available, maximizing your tax credits and making informed choices, you can make your dream of owning a home a reality. One can avail of subsidized interest rates as low as 6.50% annual interest rate on Home Loans for 20 years. First preference is given to people with special abilities and elderly citizens. 

Conclusion

Embarking on your journey for the very first to buy a home can be exciting. Understanding the intricacies of a Home loan can make this process much easier and help you make informed decisions. From determining eligibility to choosing the right loan type and understanding the application process to managing EMIs, every step is crucial to securing your dream home 

Remember that thorough research and planning are your best allies. Don’t be afraid to ask for expert advice on the intricacies of Home Loans. By being informed and prepared, you can realize your dream of owning your first home with confidence and peace of mind. Whether you’re ready to start your journey in buying a new home or still considering your options, we hope this guide has provided you with valuable information and clarity. Happy house hunting!