Home Loan Process in India: Eligibility, Interest Rates, and Documents Required Explained

Buying a home is one of the most significant financial decisions a person makes in their life. From assessing your savings and credit history to shortlisting the right property, every step influences your ability to secure the best home loan terms.

Understanding the home loan process in India is therefore essential, not just to meet home loan eligibility but also to make informed choices on interest rates, repayment structures, and the documents required for a home loan. By approaching the process with clarity, buyers can balance property aspirations with financial prudence. This can ensure a smoother and more confident path to home ownership.

Before we get to the home loan process, let's understand how interest rates for home loans are determined.

Understanding Home Loan Interest Rates in India

Home loan interest rates play a decisive role in determining long-term affordability, making it essential for buyers to understand how different rate structures work before committing to a loan.

Fixed vs Floating Interest Rates

• Fixed interest rates keep repayments unchanged throughout the loan tenure, giving borrowers stability and predictability in their finances.

• Floating rates adjust periodically per an external benchmark-such as Repo-Linked Lending Rate (RLLR), and are subject to fluctuations. Typical ranges vary based on benchmark plus spread.

Factors Affecting Home Loan Interest Rates

Interest rates are influenced by the following factors:

• RBI Repo Rate: Changes in the repo rate directly impact lending rates, with lower repo rates usually leading to reduced home loan interest rates. RBI’s current repo rate is 5.50%.

• Borrower Profile: A strong credit score, steady income, and secure employment often qualify borrowers for lower interest rates.

• Loan-to-Value (LTV) Ratio: Higher down-payments reduce the lender’s risk, which may translate into more favourable rates.

• Type of Property: Ready-to-move, RERA-compliant homes in prime locations generally attract lower rates compared to under-construction or non-compliant properties.

• Lender Policies and Market Competition: Banks and housing finance companies may adjust rates to stay competitive or align with internal risk policies.

Now that you understand how home loan rates in India work, let's understand the process of applying for a home loan.

How to Get a Home Loan: Step-by-Step Process

The home loan journey in India follows a structured pathway, beginning with financial assessment and concluding with the loan disbursement stage, requiring careful due diligence and documentation to ensure a seamless experience.

A. Pre-Application

Before applying for a home loan, it is important to prepare thoroughly. The following steps help buyers strengthen their home loan eligibility and ensure a smoother process:

1. Check your credit score

A good credit score—usually 750 or above—enhances approval chances and may help secure better interest terms. Borrowers can access their credit report through authorised credit bureaus such as TransUnion CIBIL, Experian, Equifax, or CRIF High Mark.

Moreover, as clarified by the Ministry of Finance, first-time applicants without any credit history cannot be denied a home loan solely for this reason, ensuring inclusivity in lending.

2. Assess your repayment capacity

The Reserve Bank of India advises that monthly loan commitments should remain within prudent limits. Most lenders apply a Loan-to-Income (LTI) ratio, ensuring that total EMIs (including the proposed home loan) do not exceed around 55%-60% of the borrower's gross monthly income. This helps prevent over-leveraging and ensures financial stability.

3. Verify property compliance

If purchasing an under-construction property, ensure it is RERA-registered (via the respective state RERA portal) and carries a clear title, approved building plan, and sanctioned occupancy/completion certificate. Properties lacking such compliance, especially unauthorised colonies, are typically ineligible for home loan disbursement.

B. Application Submission

Once you have selected a bank or housing finance company, the next step is to formally apply for the home loan. At this stage, submitting the correct documents is crucial for quick processing and approval. Here is the list of documents required for a home loan​:

1. For salaried applicants

Gather income-related documents such as:

• Latest Form 16 (issued by your employer and available via the Income Tax Department)

• Last three months’ salary slips

• Six months’ bank account statements

2. For self-employed applicants

Provide financial documents that reflect business stability and income:

• Two years’ audited Income-Tax Returns (downloadable from the Income Tax e-filing portal)

• Profit and loss statements and balance sheets certified by a chartered accountant

• Six months’ bank statements

3. Identity and KYC documents

All applicants must submit valid proof of identity and residence. Accepted documents include:

• PAN card (mandatory for loan applications as per Income Tax rules)

• Aadhaar card

• Passport or Voter ID

• Utility bills or a rental agreement as address proof

• Recent passport-size photographs

4. Property-related documents

Finally, ensure that the property documentation is complete and compliant. Key papers include:

• Sale agreement

• RERA registration certificate (from the respective state RERA portal)

• Approved building plan

• Title deed and possession/occupancy certificate

• Construction or sale receipts, as applicable

• Submitting these documents in a complete set reduces delays and ensures the lender can verify both financial and property details efficiently.

C. Loan Approval and Sanction

After receiving your application, the lender carefully evaluates your eligibility. This involves reviewing your income, employment stability, and credit history to assess repayment capacity. The bank or housing finance company also verifies property documents to ensure there are no legal or ownership disputes.

As part of due diligence, a technical team examines the property to confirm that construction complies with sanctioned plans and that the project has valid approvals, such as completion or occupancy certificates. Only after these checks are complete does the lender move forward.

Once the application is cleared, the bank or HFC provides a sanction letter outlining the approved loan amount, applicable interest rate, repayment tenure, instalment details, and any associated charges. Borrowers should read this letter carefully, as it forms the basis of the loan agreement.

For pre-approved properties:
In certain cases, especially for large residential projects, developers obtain pre-approval from banks or housing finance companies. This means the lender has already vetted the project’s legal and technical compliance. For buyers, this reduces paperwork and speeds up the approval stage, as the property due diligence is largely completed in advance. 

However, the lender will still evaluate the buyer’s personal eligibility—such as income, credit score, and repayment capacity—before issuing the sanction letter.

D. Disbursement of Home Loan

After the sanction letter is signed and processing fees paid, disbursement occurs in one or multiple tranches, depending on whether the property is ready or under construction:

• Ready-to-move-in Properties: Loan is usually disbursed in full directly to the seller or builder in one payment.

• Under-construction Properties: Lenders release funds in phases aligned with construction progress. During this period, borrowers pay only the interest on the disbursed amount, a system known as Pre-EMI, until the property reaches completion.

• Refinancing Guidelines: The National Housing Bank (NHB) now restricts refinance availability to loans where the initial disbursement occurs before 50% of construction is complete, aligning with prudent lending principles.

Tips for a Smooth Home Loan Process

Here are some tips to ensure your home loan application process goes smoothly:

1. Verify RERA registration and sanctioned layout/plans before choosing a property.

2. Maintain organised documentation, including income, KYC, and property papers.

3. Monitor credit health and address any discrepancies before applying.

4. Consult multiple lenders for rate comparison and processing timelines.

5. Review the sanction letter carefully, scrutinise interest structure, penalties, pre-payment terms, and insurance options.

6. Coordinate delivery timelines with disbursement schedules, especially for under-construction projects.

A Thoughtful Add-on: Home Loan Insurance

Home loan insurance is a protection plan designed to cover outstanding loan liabilities in case of unforeseen events such as death, disability, or critical illness of the borrower. While it is not legally mandatory, leading banks and financial regulators in India encourage buyers to opt for it. 

By doing so, families are shielded from the burden of repayment, ensuring that they retain ownership of their home without financial distress. For first-time buyers navigating the home loan process, this safety net adds an extra layer of confidence and security.

Check the home loan insurance options available to you to assess the right plan for you.

Conclusion: Key Takeaways on Home Loan Process in India

Navigating the home loan process in India may seem daunting at first, but with the right preparation, it becomes far more manageable. By keeping your credit score healthy, verifying property compliance, and comparing lender terms, you set yourself up for smoother approvals and better loan deals. Adding home loan insurance further strengthens financial security. With clarity, due diligence, and thoughtful planning, homeownership in India can be both an achievable and rewarding milestone.

At Birla Estates, we build trust by upholding transparency and empowering buyers at every stage of their journey. Empowered lending knowledge ensures that your home remains both a statement of achievement and a secure financial asset.

Frequently Asked Questions (FAQs)

1. How to get a home loan?

Begin by assessing your credit, income, and property details, then compare lenders for terms, interest rates, and processing timelines. Submit required documents (identity, income proof, property title, RERA certificate) and await approval and disbursement.

2. What is home loan eligibility?

Eligibility depends on income stability, credit score, employment type, LTV ratio, and property compliance. Public sector banks and HFCs usually finance up to 75–90% of the property value.

3. What are the documents required for a home loan?

Includes PAN, Aadhaar, salary slips or ITRs, bank statements, property sale agreement, building plans, title deed, and RERA certificate, as applicable.

4. What is the home loan interest rate in India?

Home loan interest rates in India vary by lender and depend on factors like credit profile, loan tenure, and RBI benchmark rates. They remain competitive but can fluctuate with market and policy changes.

5. Why is home loan insurance recommended?

While optional, it ensures loan continuity in case of the borrower’s critical illness or death, thereby protecting both the homeowner’s family and the lender.