July 24, 2017




  1. The Banks/Financial Institutes will consider the following, when
    you apply for a Home Loan.
    A) Earnings & repayment capacity: the Banks/Financial Institutes have their own norms
    and hence there will be difference in the loan amounts sanctioned to you by different the Banks/Financial Institutes.
    The main focus of the Banks is on your repayment capacity. They
    analyze how comfortably you will be able to pay the EMIs throughout the tenure of the loan.
    This analysis is done based on the ratios like
    Fixed obligation to Income ratio (FOIR) and Installment to income ratio (IIR).

    These ratios are expressed in percentage. FOIR includes all your
    fixed obligations including EMIs on your existing
    loans. IIR indicates the percentage of monthly home loan installment of the
    total income. These two ratios may vary based on actual salary
    details, years of experience, stability of income,
    professional qualification, future career growth prospects etc.

    B) Property legal and technical clearance: Banks will not finance all properties.
    Banks look into various aspects like type of property, locality,
    Builder etc. They have certain type of properties
    and localities classified as negative. Therefore before
    finalizing a property one has to check whether the property is eligible for
    funding. Though it costs you little extra it is always better to check the legal and
    technical aspects before buying a property. Banks normally have loan to value (LTV) of 70-85% of value/ cost
    of the property considering type of property.
    Apart from the above two mentioned parameters there
    is one additional and most important thing the Bank looks into is Credit
    history. Willingness to repay can be understood from ones past credit
    history and banking track.
    Before selecting the Bank the following are the few points to be understood.
    All these will help you in selecting a right home loan lender for purchasing your dream home.

    1. What is the Loan amount which the Bank is willing to extend based on FOIR ?

    2. What is Loan to value of the property ?
    3. What is the EMI amount and repayment tenure allowed ?

    4. What are the prevailing Interest rates and what is offered to you
    5. What are the other charges involved like processing fee, administrative fees,
    legal & technical fee,
    prepayment penalties, stamping charges, annual maintenance charges, insurance
    policy etc ?

    NOTE: Last but not least do not forget that any default in payment of home loan installments is more costly than your regular rent payments.
    Any such default will affect your Credit history badly and you
    have to bear high penalty for the same.

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