Check home loan eligibility and documents required

In an era where staying on rent v/s owning a house is frequently a debate, many individuals still vote for the latter.

The reason is simple: Owning a house, besides a sense of pride, provides a sense of financial security. Whether it is buying a house to live in (known as primary home) or as an investment, the decision is a vital financial goal and an emotional one too, because the family is often in the loop.

In the endeavour to achieve this goal, today you have access to home loan. And opting for a home loan comes with a tax benefit. The principal portion of the home loan Equated Monthly Instalments (EMI) is eligible for a deduction under Section 80C of the Income-tax Act, 1961, subject to a maximum limit of Rs 1.50 lakh. The interest portion, on the other hand is, tax deductible under Section 24(b) of the Income Tax Act.

Further, if you are a “first time home buyer” you can even claim an additional deduction upto Rs 50,000 under Section 80EE, subject to certain condition. However, the additional tax benefit can be availed after first exhausting the limit under Section 24(b) for the interest portion.

Before you opt for the best home loan offer, check your home loan eligibility and the important documents that you should have in place:

Personal documents – This includes your:

• Age proof (Aadhaar, Passport, PAN card, Driving License, etc.)
• Address proof (Aadhaar, Passport, Driving License, electricity bill, telephone bill, ration card, etc.)
• Photo identification proof (Aadhaar, Passport, PAN card, Voter ID, Driving license, etc.)

The above are needed to comply with Know Your Customer (KYC) norms. Apart from these, the following are must to assess your repayment capacity:

• Salary slips and Form 16 (for salaried individuals)
• Latest Income-Tax Returns of the last 2-3 years (for salaried and self-employed individuals)
• Last 6 months bank passbook/statement (for salaried and self-employed individuals)
• Challans of the Advance Income Tax payments
• A proof of address of business or profession conducted (for self-employed individuals)

If there’s a guarantor/co-applicant to your home loan application, the document of guarantor, too, are needed viz. his/her age proof, identity proof, residence proof, proof of address of business or profession (in case if the guarantor is self-employed), and other financial details as required by the bank/lender.

Property Documents – These include:

• Sale deed or Agreement of sale with the builder or seller
• Land and building tax paid receipts
• Certified copy of the blueprint or drawing of the location of the property from the revenue authorities
• Certified copy of the sanctioned plan of the property (showing floor plan for flat purchase)
• Detailed estimate of cost of construction (in case of self-construction)
• Report stating the valuation of the property in format from the empanelled valuer (This is usually done by the lender)
• Allotment letter from builder/housing board/co-operative society
• No Objection Certificate (NOC) under the Urban Land Ceiling Act, 1976
• NOC from the co-operative society , Share Certificate from the co-operative society, Title Search Report when purchasing a re-sale property
• Letter from builder/society/housing board stating their bank account details for remittances
• Original receipts of the advance paid for purchase
• Encumbrance Certificate (to certify that no dues are pending and the title is clear and marketable)
• Occupancy and possession certificate (for completed properties)

These documents need to be submitted with the Home Loan application form with photographs of the applicants.

After you apply, you can check my loan status.

For a home loan balance transfer case, in addition to the above, the following documents are required:

• All necessary property documents that are in possession of the existing home loan lender/bank
• A copy of the loan statement (preferably an attested copy by the bank)
• Bank statement of the last 12 months from where the EMIs were deducted
• No objection certificate or consent letter from the existing bank

A thorough due diligence will be conducted at the lender’s end before the home loan is sanctioned. In case of home loan transfer, too, once the entire process is completed, the bank will transfer (i.e. disburse) the outstanding loan amount to the previous lender/bank and earlier home loan account will be closed. All pending ECS and post-dated cheques with the earlier lender/bank will stand cancelled. The future EMIs on the outstanding loan balance will be payable to the new lender/bank as per the new terms and conditions.

[Read: Can Home Loans be offered on the cost of the property?]

To sum-up…

The documents required for a home loan could vary across banks and depending on every case, but broadly the ones mentioned here are necessary. Home loans are an efficient avenue to accomplish your buying your dream home and even renovating it.

But make sure you aren’t going overboard -- borrow only as much you can repay, for it not to become a burdensome experience.  Ideally, your Equated Monthly Instalments (EMI) should not exceed 40-50% of net monthly income.    

To get an estimate of how much the EMI would be on the home loan (which consist of principal and interest amount), use Axis Bank’s Home loan EMI Calculator. It is an effective tool: provides quick result, help you ascertain if the monthly EMI is affordable or not, and makes planning for a loan easier for you.

Happy Banking!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.