The transition from renting a home to owning one is a very big and hectic decision as well. It really doesn’t matter either you decide to buy one or rather build one the both of the options needs a lot of economical support.
And in this process you either save for years and years and then invest in it or either you’ll look for investors or loan providers which will provide you a particular amount which you’ll be paying off in upcoming years or in between the time gap provided by the investor.
Analyzing how much home loan one can get
But the question that rose is how much loan can I get? To answer this query you’ll need to check some points to receive a decent amount from your lender.
The amount that the bank will be willing to offer you as credit is dependent upon a variety of factors including from your credit history and credit score, your age, your income and to your employment status, and your existing loan obligations.
And in cases the home loan amount can go up to 85% of the value of the property, but this is a variable figure and the final decision depends and rather lies with your lender.
1 – How much loan are you eligible for?
On the very first note, before you actually start the process of applying for a home loan, you’ll need to determine your total eligibility, which will mainly depend on your repaying capacity.
With your repayment capacity, we mean or are targeting on your monthly disposable/surplus income, which, in turn, is based on various sub-factors such as total monthly income/surplus less monthly expenses, and other factors like spouse’s income, assets, liabilities, the stability of income, etc.
Before actually providing you the finalized amount the bank has to make sure that you’re or you’ll be able to repay the loan in time gap provided or as negotiated.
Typically, a bank assumes that about 40% of your monthly disposable/surplus income is available for repayment. Generally, the higher the monthly disposable income is, the higher will be the loan amount you will be eligible for.
The tenure and interest rate will also determine the loan amount. Further, the banks generally fix an upper age limit for home loan applicants, which could impact one’s eligibility.
In general, you will be eligible for getting a high loan amount only if:
- You have maintained a credit score of 750 or above.
- You have a good and healthy credit profile with no delinquencies or accounts with ‘Closed’ or ‘Written-Off’ status
- You have steady employment and a reasonable monthly income. If you have a healthy projection of your future salary, you stand to be eligible for a higher loan amount.
- Your monthly loan expenses do not exceed 50% of your net monthly income. How much the bank/the lender rather decides to lend you depends on, among other factors, your existing loan obligations and your ability to take on further debt and service it over the long duration of the loan
2 – How much Home loan can I get?
Most money lenders require about a minimum of 10-20% of the home’s purchase price as a down payment from you. It is also often called ‘one’s own contribution’ by some of the lenders.
And for the rest of them, which can be 80-90% of the property value, is financed by the lender. Although the total financed amount also does include registration, transfer, and stamp duty charges.
Even though the lender calculates a higher eligible amount, but it is actually not necessary to borrow that provided amount.
Although a lesser amount can be borrowed. One should try to arrange the maximum of the down payment amount and less of home loan so that the interest cost is kept at minimal.
3 – What are the tenure interest rates on a home loan?
As home loans can be huge, the repayment period is commensurately long. The tenure can be stretched up to as long as 30 years.
There are two basic types of interest rates and you need to study all the interest rate options carefully before deciding which one to choose:
- Fixed-rate: You pay one fixed interest rate for the entire tenure of your loan and you have a fixed EMI for the entire duration of the loan.
- Floating rate: The interest rate you pay varies during your loan tenure, depending on external market conditions. You can choose this option only and only if you are confident that interest rates will go down during your loan period.
4 – What is the further processing in the loan approval?
On analyzing the provided documentary proof, the bank has to decide whether or not the loan can be sanctioned by them or provided to you. The basic quantum of the process of the loan that can be sanctioned depends on this.
The bank will then finally give you a sanction letter stating the complete details including the loan amount, tenure and the interest rate, among other terms of the home loan. The stated terms will be valid until the date mentioned in that letter.
When the loan is actually handed over to you, it amounts to disbursement of the loan. This happens once the bank is through conducting technical, legal and valuation exercises.
One may opt for a lower loan amount during disbursement against what is mentioned in the sanction letter. At the disbursal stage, you need to submit the allotment letter, photocopies of title deed, encumbrance certificate and the agreement to sell papers.
The interest rate on the date of disbursement will apply, but not the one which is mentioned as per the sanction letter. In such a case, a new sanction letter gets prepared.
To sum up, a home loan is actually a very substantial financial commitment and you need to learn about each and every option to determine which combination of the loan amount, tenure and interest rate suits your needs the best.