The home-loan process, step by step

Most home buyers finance part of their purchase with a loan. The process is similar across banks and housing finance companies, though terms vary, so compare a few lenders before you commit.

1. Check your eligibility

Lenders look at your income, existing loans, age and credit history to decide how much they can lend and for how long. Many offer an online eligibility check; a pre-approval gives you a clearer budget before you shortlist homes.

2. Keep your documents ready

Lenders typically ask for:

• Identity and address proof, such as PAN and Aadhaar
• Income proof, such as salary slips, income-tax returns and bank statements
• Property documents, such as the allotment letter, the agreement for sale and the project's approvals

3. Application and sanction

After you apply, the lender assesses your finances and the property. If approved, you receive a sanction letter setting out the loan amount, interest rate, tenure and conditions. Read it carefully, including charges for processing and prepayment.

4. Your own contribution

Lenders finance only part of a property's value, and the Reserve Bank of India sets limits on how much. The rest, your down payment, comes from your own funds, along with costs such as registration.

5. Disbursement for an under-construction home

For a home still being built, the loan is usually released in stages as construction progresses, often in line with the payment plan. Until the full amount is released, you may pay interest only on what has been disbursed, sometimes called pre-EMI. Full EMIs begin after the final disbursement, or earlier if you choose.

6. Taxes

Home loans can carry tax benefits on principal and interest, depending on the tax regime you follow. Ask your tax adviser how the current rules apply to you.