Get the documentation right
Keeping your documents ready is the first step in applying for a home loan. Documentation requirements differ depending on whether you are a salaried or self-employed professional, or a self-employed non-professional. Salaried individuals should provide the bank with the standard Know Your Customer (KYC) documents comprising proof of identity, proof of residence and proof of age, along with photographs. Apart from this, latest bank statements and salary slips need to be submitted. Some banks also ask for income-tax returns of the last 2-3 years.
Self-employed professionals should submit an educational qualification certificate and proof of business existence, in addition to KYC documents and bank statements. In most cases, the latest audited balance sheet and income statements are
Self-employed non-professionals usually have more stringent documentation requirements, with basic KYC documents, bank statements and photographs needed. In addition to this, most banks require some document as proof of business existence. Audited financials and income-tax returns are some of the other documents needed. It is advisable to keep your basic documents ready before you apply for a home loan. This not only speeds up the process of getting one, but also reduces the chances of rejection.
Know eligibility criteria
Once you have the documents in place, evaluate the eligibility criteria for a loan. All banks have more or less the same eligibility criteria. Nevertheless, it is important to check with your bank as there may be some unique conditions. Different categories of customers, such as salaried, professionals and
self-employed individuals, have different criteria.
Home loan eligibility depends primarily on the income of the borrower and other outstanding liabilities. Many banks specify the age of the customer as a criterion. This is to make sure that the customer can repay the loan fully before his earning capacity comes to an end.
Enhancing the loan amount
You can bump up your loan eligibility (quantum of loan) by including the income of your spouse or parent. When income is high, you automatically have more disposable money in your hands. This means servicing a bigger EMI amount is easy and feasible. Thats why you can get a bigger loan sanctioned if you include the income of your family members.
Remember, when you combine your spouse or parents income, you will have to take a joint home loan, in their name as well. Co-owners of the property must necessarily be co-applicants though co-applicants need not be co-owners. Also, keep in
mind that when you apply for a joint loan, you must submit all the
required documents for the co-applicant as well.
Second home loan
It is natural to plan for a second home during ones middle age. You may want to take a second home loan for this purpose. However, a second home loan doesnt come easy. The bank will first evaluate your existing liabilities. If you are already servicing a loan on your first house, the bank will consider that EMI before calculating the eligibility. This means, if you have a higher takehome salary, your chances of getting a second home loan are higher. This is where combining your spouses income comes in handy.
Most banks would prefer keeping your total EMI commitment to less than 50% of your salary. A second home loan usually requires you to put in a higher margin amount compared to what you contributed for the first. Opting for a second home loan from your existing banker can sometimes get you a lower interest rate. Also, remember to negotiate with your banker. However, you must always compare market rates and what other banks have to offer before you finalise on the bank.
The writer is CEO, BankBazaar.com