RBI Guidelines For Home Loan
- For what purposes can I seek a first time home loan
- How will your bank decide your home loan eligibility?
- What documents are generally sought for a loan approval?
- What security will you have to provide?
For what purposes can I seek a first time home loan
- You can quickly convert the loan into cash
- No need to show proof of income
- These gold loans do not call for a guarantor
- CIBIL score is not a factor in pricing
- Low paperwork and quick processing
- Security of your gold items
How will your bank decide your home loan eligibility?
Your bank will assess your repayment capacity while deciding the home loan eligibility. Repayment capacity is based on your monthly disposable / surplus income, (which in turn is based on factors such as total monthly income / surplus less monthly expenses) and other factors like spouse’s income, assets, liabilities, stability of income etc. The main concern of the bank is to make sure that you comfortably repay the loan on time and ensure end use. The higher the monthly disposable income, higher will be the amount you will be eligible for loan. Typically a bank assumes that about 55-60 % of your monthly disposable / surplus income is available for repayment of loan. However, some banks calculate the income available for EMI payments based on an individual’s gross income and not on his disposable income.
What documents are generally sought for a loan approval?
In addition to all legal documents relating to the house being bought, banks will also ask you to submit Identity and Residence Proof, latest salary slip ( authenticated by the employer and self attested for employees ) and Form 16 ( for business persons/ self-employed ) and last 6 months bank statements / Balance Sheet, as applicable . You also need to submit the completed application form along with your photograph. Loan applications form would give a checklist of documents to be attached with the application.
Do not be in a hurry to seal the deal quickly.
Please do discuss and seek more information on any waivers in terms and conditions provided by the commercial bank in this regard. For example some banks insist on submission of Life Insurance Policies of the borrower / guarantor equal to the loan amount assigned in favour of the commercial bank. There are usually amount ceilings for this condition which can also be waived by appropriate authority. Please read the fine print of the bank’s scheme carefully and seek clarifications.
What security will you have to provide?
The security for a housing loan is typically a first mortgage of the property, normally by way of deposit of title deeds. Banks also sometimes ask for other collateral security as may be necessary. Some banks insist on margin / down payment (borrowers contribution to the creation of an asset) to be maintained / made also.
Collateral security assigned to your bank could be life insurance policies, the surrender value of which is set at a certain percentage to the loan amount, guarantees from solvent guarantors, pledge of shares/ securities and investments like KVP/ NSC etc. that are acceptable to your banker. Banks would also require you to ensure that the title to the property is free from any encumbrance. (i.e., there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely).