Essential checklist for First-time Home Buyers to get loan Approval

The idea of buying a new home and moving into your sweet little abode can be quite exciting and overwhelming at the same time. You might be excited about finally achieving your long-held dream of becoming a homeowner and looking forward to a peaceful life with your loved ones.

However, you might also feel anxious about navigating the legal process of buying a home. Additionally, since purchasing a home involves a significant financial investment, obtaining approval for a home loan can be quite stressful.

If you are a first-time home buyer, this guide is just for you. We will discuss a few essential checklist items for getting home loan approval.

Assess your financial condition and plan your loan amount

As a first-time home buyer, getting tempted by a bigger home with modern amenities, more space, or a plush location can be easy. But remember, a bigger home often comes with a higher price, which may burn a deep hole in your pocket.

So, as a first-time buyer, one of the most important home-buying tips you must remember is to have a fixed budget in mind and strictly adhere to it. Before looking for the best home loan offer, know the maximum amount you can afford to borrow and the EMI you can pay every month. This will also help narrow your choices and make your home-buying process much easier.

Save funds for the down payment

As a first-time home buyer, you must know that the lenders do not sanction 100% of the property's cost as a home loan. Instead, they fund only a certain percentage, which ranges anywhere between 70% to 90%.

For example, if you plan to purchase a home valued at ₹1 crore and your lender sanctions only 70% of the property cost, you may get only ₹70 Lakh as a home loan. You must pay the balance from your pocket; this is called a down payment. A downpayment is an integral part of the home application and approval process.

So, it is paramount that you start planning your finances well in advance before you approach the lender for a home loan and arrange the down payment without compromising on your other financial goals.

Know the home loan basics and eligibility

You can refer to any home buying guide online, and almost all of them suggest that as a first-time home buyer, you must understand the home loan basics well. This includes the home loan interest rate types and affecting factors.

Also, you must know about the documents required for a home loan and prepare the necessary papers well in advance, as the specific lender requires. This will help you avoid last-minute hassles and delays in the approval and disbursement process due to insufficient documents.

Try applying for a pre-approved home loan

When discussing the essential checklist for first-time home buyers on how to buy a house, you cannot overlook the importance of exploring the pre-approved home loan offer. A pre-approved home loan is a sanction letter that lenders offer to potential borrowers after assessing their financial credentials and offering them a chance to avail of a loan of a specific amount.

If you receive a pre-approved home loan offer, you must know that it may be only for a limited period, usually about six months from when you receive it. So, if you have already finalised the property, you can apply for the pre-approved offer and easily get the funds.

If you have not shortlisted the property, you must finalise it within the offer's validity period. The pre-approved home loan offer can be a great boon for first-time borrowers as it gives you a clear idea about the home loan amount you can get, and thus, you can shortlist the property accordingly.

Apply for a home loan with only a reputed lender

Making your dream of buying a new home a reality may greatly hinge on getting the home loan application sanctioned. Because it is a long-term financial commitment, you should apply for a home loan with only a reputed home loan lending organisation.

Today, most reputed lenders in India offer 100% digital services and ensure complete transparency in the whole process. So, you can apply for a home loan from the comfort of your home or office with just a few clicks of a few buttons.

Also, lenders nowadays provide online guidance to help you through the process. They even allocate a dedicated relationship manager who works with you throughout the process and helps you at every step, from filling out the application form to submitting the documents and helping you understand the jargon in the final home loan agreement.

Take advantage of the tax benefits

Another critical first-time home buyer tip is taking advantage of the tax benefits of a home loan.

When you take out a home loan to buy a home, you can avail yourself of tax benefits of up to ₹1.5 Lakh on the repayment of the principal amount. This deduction is guaranteed under Section 80C of the Indian Income Tax Act. Similarly, you can enjoy tax benefits of up to ₹2 Lakh on the repayment of the interest amount under Section 24 of the IT Act. More importantly, you can take advantage of these tax deductions yearly through the entire repayment period or until you pay off the full amount.

Apart from the above-mentioned standard home loan tax deduction, as a first-time home buyer, you can enjoy additional tax benefits of up to ₹50,000 under Section 80EE of the Indian Income Tax Act. However, to avail of this tax benefit, you must meet the following requirements-

• - The home loan you avail must not be more than ₹35 Lakh
• - The value of the property you purchase must be up to ₹50 Lakh or less

Conclusion

Buying a home is a big decision and perhaps the most important financial decision you may take in your life. So, as a first-time home buyer, you must do your due diligence and ensure a smooth home-buying and home loan-borrowing experience.