A BRIEF ON EVERYTHING YOU WANTED TO KNOW ABOUT A HOME CONSTRUCTION LOAN

18 August of 2017

So, you have finally decided to build that house you have always envisioned for your family and you. Perhaps, you have found the perfect plot to build your house on or you already own it. You know where the sun rays will fall on your house and from which balcony you will see the setting sun. You have every minute detail of the house figured out except the finance.

After doing some basic research, you know that what you need is a home construction loan to build the house that you want. However, if you are confused on how to proceed with the loan application read on to find out the crucial steps you need to take to ensure that you get your loan:

• Gather necessary documents

Depending on whether you are a salaried employee or self-employed, the documents you need will vary. You need four types of documents; depending on the financial institution, you will need to submit one or multiple documents of the same category. The categories are as follows:

• Identity proof

You can submit a copy of your PAN card, driving license, or voter’s I.D if you are self-employed. If you are a salaried employee, then you have the additional document of Employee Card that you need to submit.

• Residence proof:

Your Aadhaar Card, latest electricity bill or water bill, Ration Card are all valid documents you can submit. The documents stay the same irrespective of whether you draw a salary or are self-employed.

• Income proof:

This is one document on which the terms of your loan will depend. How much you currently earn and what was your last drawn salary matters to the financial institution as it assures them of your capacity to repay the loan. If you are a salaried employee, then you could submit your last three months of salary slips, two years of Form 16 of income tax, and six months of bank statement with the salary credit mentioned. In the case of being self-employed, you will need bank statements of six months, financials audited by a CA (as and where applicable), and last two years of Income Tax Refund with computation.

• Guarantor: A co-applicant or guarantor is mandatory for both, salaried and self-employed loan applicants.
• Improve credit history

No financial institute will lend money to an individual with a sketchy credit history. If you have other loans, make sure that you have repaid most or all of them. If that isn’t possible, ensure that your EMI payments on these previous loans are regular. Regular EMI payments assure the financial institute which you are applying for a loan to of your credit worthiness.

Once you have taken the necessary steps to achieve both of the points mentioned above, the next step is to apply for the loan. At this juncture, you will need to look at the interest rates and tenure along with other details of the loan.

Lastly, take the help of the financial institute to arrive at the best possible loan for you as you look forward to building your home.