Guide · Home loan
Your first home loan, from application to first EMI
Eight steps, in the order a bank takes them. Knowing what comes next takes most of the worry out of it.
A home loan is not one decision. It is a short chain of them, and the bank does each one only after the last is done. If you know the chain, you can have your papers ready before anyone asks.
Two words first. Sanction means the bank agrees, in writing, to lend you up to a stated amount. Disbursement means the bank actually pays that money out, usually to the seller or builder, not to you.
Step 1
Work out what you can borrow
Banks look at your monthly income, the EMIs you already pay, your age and your credit score. The Reserve Bank of India also caps how much of a home’s value a bank may lend (the loan-to-value ratio): up to 90% for loans up to ₹30 lakh, 80% above ₹30 lakh up to ₹75 lakh, and 75% above that. The rest is your down payment.
Try the eligibility calculator and the down payment calculator before you talk to anyone.
Step 2
Check your credit report
Every individual can get one free full credit report a year from each credit bureau licensed by RBI. Look for loans you do not recognise and late payments that are wrong. Fixing an error takes weeks, so do this before you apply, not after.
Step 3
Compare lenders on the full cost
Do not compare only the interest rate. Ask each lender for the processing fee, any legal or technical fee, and whether the rate is floating or fixed. Ask for the Key Facts Statement, which RBI now requires lenders to give before you sign; it shows the all-in annual cost in one figure.
Under RBI rules, banks cannot charge a foreclosure or prepayment penalty on a floating-rate home loan taken by an individual for a non-business purpose.
Step 4
Apply with your documents
The usual set: PAN, Aadhaar or another address proof, the last few months’ salary slips, bank statements, Form 16 or income tax returns, and photographs. Self-employed buyers add business proof and audited accounts. Our documents checklist has the property side.
Step 5
Get the sanction letter
If your profile is approved, the bank issues a sanction letter: the amount, the rate, the tenure and the conditions. Read the conditions. Sanction is about you. The bank has not yet approved the property.
Step 6
Let the bank check the property
Now the bank’s lawyer checks the title and approvals (the legal check) and its engineer checks the building and its value (the technical check). For a new project, many banks have already approved it, which makes this step faster. Ask the builder which banks have.
Step 7
Sign, register, and receive the first disbursement
The bank pays only after the agreement for sale (for an under-construction home) or the sale deed (for a ready home) is signed and registered. For an under-construction home, money goes out in stages as the building rises, against the builder’s demand letters.
Step 8
Start paying: pre-EMI, then EMI
While disbursement is partial, you may pay only interest on what has been paid out. This is called pre-EMI. Once the loan is fully disbursed, the full EMI (interest plus principal) begins. Some buyers choose to start full EMIs early to cut total interest; ask your bank.
See the monthly figure for any loan with the EMI calculator.
FAQ
Questions buyers ask
How long does a home loan take to come through?
It varies by lender and by how ready your papers are. Sanction can be quick when documents are complete; the legal and technical checks on the property usually take longer. Having everything ready before you apply is the biggest thing you control.
Can I get a loan for the stamp duty and registration?
Generally no. RBI does not allow banks to count stamp duty, registration and similar charges in the home’s cost when working out the loan amount, so plan to pay them from savings.
Is a co-applicant a good idea?
Adding an earning co-applicant, such as a spouse, combines both incomes, which can raise the amount you are eligible for. Both people are then responsible for repayment. If both are also co-owners, each can claim the tax benefits on their share, subject to the limits.
What tax benefits does a home loan give?
Under the old tax regime, interest on a loan for a self-occupied home can be deducted up to ₹2 lakh a year (Income Tax Act, s.24(b)), and principal repaid counts within the ₹1.5 lakh limit of s.80C. The new tax regime does not allow these two deductions for a self-occupied home. Check which regime you file under.
Floating or fixed rate?
A floating rate moves with the bank’s benchmark, so your EMI or tenure can change. A fixed rate stays put for a set period but often starts higher. Most home loans in India are floating. Whichever you pick, read how and when the rate resets.
Want someone to walk this with you?
The Reeva team helps first-home buyers through every one of these steps. Ask for a callback.