Key numbers: Most banks lend up to 80% of the property value. You need a CIBIL score of at least 750 for competitive rates. Tax deductions on principal (80C) + interest (24B) can reach ₹3.5 lakh per year — but only under the old tax regime. The new tax regime (now the default) does not allow these deductions.
Step 1: Check your eligibility
Before approaching any bank, check your eligibility on your own so you can negotiate from a position of knowledge. The key factors lenders look at:
- Credit score (CIBIL) — Aim for 750+. Check for free at CIBIL, Experian, or through apps like BankBazaar or OneScore.
- Income stability — Salaried: at least 2 years at current employer. Self-employed: at least 3 years of consistent income with filed ITRs.
- FOIR (Fixed Obligation to Income Ratio) — Your total monthly EMIs (including the new home loan EMI) should not exceed 40–50% of your net monthly income.
- Age — Most banks lend to borrowers aged 21–65. The loan must be fully repaid before you turn 65–70 (depending on the lender).
- Existing loans — Personal loans, car loans, and credit card dues reduce your home loan eligibility. Pay these down before applying.
Step 2: Choose the right lender
Home loans are available from three types of institutions: scheduled commercial banks (SBI, HDFC, ICICI, Axis), Housing Finance Companies or HFCs (LIC Housing Finance, PNB Housing, Can Fin Homes), and NBFCs (Bajaj Housing Finance). HFCs typically have slightly more flexible income assessment criteria.
When comparing lenders, look at:
- Interest rate — Compare effective annual rates, not just the headline rate
- Processing fee — Typically 0.5–1% of loan amount; sometimes waived
- Prepayment charges — Floating rate loans: nil. Fixed rate: 2–4%
- Turnaround time — Sanction in 3–7 working days; disbursement in 7–15 days
- Branch / service quality — Matters for the 15–20 year relationship
Step 3: Gather your documents
Having all documents ready avoids delays. The standard list:
| Category | Documents Required |
|---|---|
| Identity & Address | Aadhaar, PAN card, Passport / Voter ID / Driving licence |
| Income (Salaried) | Last 3 months salary slips, Form 16 (last 2 years), 6-month bank statement |
| Income (Self-Employed) | ITR + P&L statement (last 3 years), 12-month bank statement, business registration |
| Property | Sale agreement / allotment letter, title documents, approved plan, NOC from society (resale) |
| Existing loans | Loan statements, sanction letters for any running loans |
Step 4: The loan process — what to expect
- Application & document submission — Online or at branch. The bank will verify your documents and do a credit check.
- Sanction letter — If eligible, you receive a sanction letter specifying the loan amount, interest rate, tenure, and conditions. Valid for 3–6 months.
- Property legal check — The bank's legal team verifies the property title, approvals, and encumbrance certificate. This can take 5–10 working days.
- Technical valuation — The bank values the property independently. The loan is based on the lower of the valuation or the transaction price.
- Loan agreement & disbursement — You sign the loan agreement, pay the processing fee and any down payment, and the bank disburses the funds (directly to the seller or builder).
Tax benefits on home loans
| Section | Benefit | Limit | Condition |
|---|---|---|---|
| 80C | Deduction on principal repayment | ₹1.5 lakh/year | Clubbed with other 80C investments (PPF, ELSS, etc.) |
| 24(b) | Deduction on interest paid | ₹2 lakh/year | Self-occupied property; no limit for let-out property |
| 80EEA (EXPIRED) | Additional interest deduction — first-time buyers only | ₹50,000/year | Only for loans sanctioned 1 Apr 2019–31 Mar 2022. NOT available for new loans taken after March 2022. |
Important — new tax regime is now the default: Since AY 2024-25, the new tax regime is the default for all taxpayers. Under the new regime, you cannot claim 80C, 24(b), or any home loan deduction. These deductions are only available if you actively opt for the old regime. Consult a chartered accountant to determine which regime is beneficial for your income level before finalising your loan.
Section 80EEA has expired. It applied only to home loans sanctioned between 1 April 2019 and 31 March 2022. If your loan was sanctioned after March 2022, this deduction is not available to you, regardless of which tax regime you choose.
Tips to get the best home loan deal
- Apply to 2–3 lenders simultaneously to compare final offers; multiple enquiries in a short window have minimal impact on your CIBIL score
- Negotiate the processing fee — it is almost always waivable, especially if you have a good credit score
- Choose a longer tenure (25–30 years) to keep EMIs manageable, then prepay when you have surplus funds — floating rate loans have no prepayment penalty
- If you are buying jointly with a spouse, have the spouse as both co-borrower and co-owner — only then can each person independently claim up to ₹2 lakh on interest under Section 24(b) (old tax regime only)
- Get the bank's legal and valuation reports — you are paying for them; they also give you assurance about the property title