Your Guide to Hassle-free Home Loans

Owning your own home is a dream for a majority of Indians and with sky rocketing property prices a home loan is among the most viable options out there. As a result of the huge demand for home loans, almost every bank and nearly every NBFC operating in India provides attractive home loan options to rope in new customers. Unfortunately, the process to apply for a home loan can still features a number of bumps and in the following sections we will discuss some of the common pitfalls so that you can avoid some of the common ones at the time of applying.

Check your Credit Report

One of the first checks that your application will undergo is a look at your credit history including your current credit score. This takes into account all your previous debts including credit card bills and loans. The report not only considers whether these debts were cleared on time, but also takes into account if there are any still outstanding. Your credit score included in the credit report is a 3 digit number ranging from 300 to 900. It reflects your credit history and the closer you are to 900, the better your chances of being approved. To check your free credit score for home loan, log on to Paisabazaar.

Choose between Floating Rate and Fixed Rate

There is often no clear answer to the question whether fixed or floating rate is better. In some cases, the lender even includes a clause that allows a change in your home loan’s fixed interest rate after a specific period of time or periodically. Other times you may end up paying more on a floating rate loan that starts off much lower, but later increases to a level much higher that the fixed rate. Use our home loan EMI calculator to check and select the option that best suits your requirement.

Keep in Mind the Additional Charges

Home loans typically cover only 80% of the property value as per the evaluator; therefore you will need to make arrangements for the remaining 20% of the loan amount (usually the down payment) as well as any charges levied by the lender.  Following is a list of typical charges levied by a bank when you apply for a home loan.

Table 1: Key charges levied by Axis Bank on Home Loans*

Type of Charge	Amount/Percentage Value
Processing charges	Up to 1% of Loan Amount
Cheque/Instrument swap charges	Rs. 500 each time
Duplicate Statement issuance charges	Rs. 250 each instance
Issuance charges for photocopy of title documents	Rs. 250 per set of documents
Prepayment Charges for fixed rate loan	2% of outstanding principal prepaid
Prepayment charges for floating rate loan	Nil
Late Payment Charges	Rs 500 per bounced cheque and penal interest of 24% per annum (2% per month) on the overdue installments

*The list above is indicative and the charges are liable to change from time to time. Additional charges that may also be applicable to your home loan. To compare the charges applicable to you, log on to Paisabazaar.

Arrange for Property-Related Documents

A home loan application mandatorily requires submission of certain documentation. The first of these is an estimate provided by an evaluator. Using a bank-approved evaluator is the best option in case the property you intend to purchase is not pre-approved by the bank. Following is a generic list of property documents need to be submitted for a new property loan application:

• Property development plan copy
• No objection certificate (NOC) issued by developer
• Mother deed of land on which property stands
• A copy of agreement made between the developer and you.

The following is a generic list of documents required in case of a resale property:

• Copy of seller’s property registration certificate
• Power of attorney document that enables conversion of leasehold to freehold
• Mutation certificate from applicable municipal corporation/municipality
• NOC from bank is required in case there is an outstanding loan on the property

Some other documents that may be required by the bank in case it is not a bank pre-approved property. These include the land use, completion and occupancy certificates among others. For more tips regarding how to choose a property to purchase using a home loan,