A home loan is the largest financial commitment most Indians ever make. With property prices in metro cities routinely crossing ₹80 lakh–₹1.5 crore, understanding how lenders evaluate you, how EMI is structured, and which tax deductions you can claim makes the difference between a comfortable repayment and a stretched budget. This guide covers the full home loan journey — from checking eligibility to registering your property — in plain language.
Table of Contents
Eligibility criteria
Banks assess home loan applications on four pillars:
- Income: Salaried applicants typically need 2–3 years of continuous employment; self-employed need 3 years of ITRs showing stable profits.
- Credit score: A CIBIL score of 750+ gets the best rates. Below 700, many lenders reject or charge a premium. See our CIBIL guide.
- Debt-to-income ratio: Total EMIs (existing + proposed) should stay under 50–60% of net monthly income. Use our DTI calculator.
- Property: Lenders approve loans only on legally clear titles with approved building plans. Under-construction projects need RERA registration.
Most banks finance up to 75–90% of property value (LTV ratio). You must fund the rest as down payment from savings — typically 10–25% of property cost.
Interest rates and types
As of 2026, home loan rates in India range roughly from 8.25% to 9.75% p.a. depending on credit score, loan amount and lender type (public vs private bank vs HFC).
| Rate type | How it works | Best for |
|---|---|---|
| Floating (linked to EBLR/RLLR) | Rate changes when RBI repo rate changes | Most borrowers — rates usually fall over long tenure |
| Fixed (partial) | Fixed for initial 2–5 years, then floating | When you expect rates to rise sharply |
Compare APR (rate + processing fee + insurance) across at least three lenders, not just the headline rate.
Understanding EMI
EMI = Equated Monthly Installment. Early in a 20-year loan, roughly 80% of each EMI is interest and only 20% reduces principal. This ratio flips in later years.
Worked example: ₹50 lakh loan at 8.5% for 20 years → EMI ≈ ₹43,391/month. Total repayment ≈ ₹1.04 crore (₹54 lakh interest). Adding ₹5,000/month as prepayment from year 3 can cut 4–5 years off tenure.
Calculate your exact EMI with our free Loan EMI Calculator or learn the formula in our EMI calculation guide.
Tax benefits (old tax regime)
Home loan tax benefits apply only if you choose the old tax regime:
- Section 80C: Up to ₹1.5 lakh/year on principal repayment (shared with PPF, ELSS, etc.)
- Section 24(b): Up to ₹2 lakh/year on interest for self-occupied property
- Section 80EEA: Additional ₹1.5 lakh interest deduction for first-time buyers on affordable housing (specific conditions apply)
Under the new tax regime, these deductions are not available. Compare both regimes with our Tax Calculator or read How to Save Income Tax in India.
Documents required
Salaried: PAN, Aadhaar, salary slips (3 months), bank statements (6 months), Form 16, property papers (sale agreement, title deed, approved plan).
Self-employed: PAN, Aadhaar, ITR with computation (3 years), GST returns if applicable, business proof, property papers.
Step-by-step approval process
- Pre-approval — submit documents; bank issues in-principle sanction (valid 3–6 months)
- Property verification — bank's legal team checks title; technical team values property
- Final sanction — loan agreement signed; processing fee (0.25–1% of loan) paid
- Disbursement — for resale: single payment to seller; for under-construction: stage-wise to builder
- Registration — property registered; original documents held as lien until loan cleared
Typical timeline: 15–30 working days from complete application to disbursement.
Tips to get the best deal
- Improve CIBIL score 3–6 months before applying
- Negotiate processing fee — it's often waived during festive offers
- Choose shorter tenure if EMI allows — total interest drops dramatically
- Make annual prepayments when you get bonuses — no prepayment penalty on floating-rate home loans (RBI rule)
- Check if your employer offers a tie-up with a bank for 0.05–0.25% rate discount