Step-by-Step Home Loan Process Explained for First-Time Buyers

Applying for a home loan for first-time home buyers can be a complicated task. Here is the detailed step-by-step home loan process in India to help first-time buyers:

Step 1: Preparation

The goal of this step is to know your budget and strengthen your home loan eligibility.

• Check your credit score/report (CIBIL/ Experian/ CRIF) first and fix errors (if you find any).
• Keep your credit utilisation below 30%. 
• Avoid new unsecured loans/ queries for at least 60 days.
• Estimate affordability by targeting an EMI of a maximum 30% to 40% of your net take-home (including other EMIs).
• Create the down payment + other charges corpus (registration, stamp duty, MODT/ franking, valuation, legal, CERSAI, moving costs, society transfer, etc.) and keep a 5% to 10% buffer.
• Decide fixed vs floating interest rate by understanding the reset mechanism (RLLR/MCLR) and repricing frequency. Usually, reputed lenders offer the best home loan interest rates as compared to new lenders.
• Consider applying with a co-applicant/co-owner (parent, spouse, etc.) to improve your loan eligibility.

Step 2: Documents Checklist

Keep originals and soft copies handy. Lenders may ask for variations.

• KYC documents: Aadhaar, PAN, passport, driver’s licence, recent photographs, and current and permanent address proofs.
• Income documents: 
  • For salaried: Last 3 - 6 months' salary slips, 6 - 12 months’ salary account bank statements, Form 16 of last 2 years, ITR, employment proof/ ID, appointment/ confirmation letter.
  • For self-employed/ professional: ITR along with computation of last 2 - 3 years, audited P&L, balance sheet, schedules, 12 months’ current account bank statements, GST returns, firm/company registration, MSME/Udyam, partnership deed/ MOA/ AOA.
• Property documents: Vary for different cities/states, project types, plot loans, type of lenders, etc. Keep one organised folder per property with subfolders for KYC, income, property, and receipts
  • New/ under-construction properties: RERA registration, builder-buyer agreement, allotment letter, approved plans/ layout, commencement/ CC and stage-wise demand schedule, and NOCs.
  • Resale/ ready properties: Mother/ parent deed and chain of title, latest sale deed, Encumbrance Certificate, khata/ patta/ mutation, latest tax/ maintenance/ electricity receipts, society NOC, occupancy/ completion certificate.

Step 3: Shortlist Lenders and Compare Interest Rates

Shortlisting lenders and comparing features of their home loans can be helpful in making an informed decision.

• Compare interest rates, processing fees, part-prepayment rules and charges, home loan eligibility, top-up options, doorstep service, and switching/ balance-transfer costs.
• Use the home loan EMI calculator tool to come to a suitable EMI according to your budget.
• Ask for in-principle approval (it is a soft check facility offered based on your income and tentative property value). This service strengthens your negotiation power with sellers/builders.
• Check and confirm if the lender has the builder/ project approved, as it speeds up legal and technical checks for new projects.

Step 4: Apply for the Loan and Pay the Processing Fee

This is a crucial step and has to be done carefully, as providing incomplete/ inaccurate information while applying for the loan can lead to rejection.

• Fill the application either online or by visiting the branch. 
• Add co-applicants if needed.
• Upload KYC and income documents. 
• Give bureau consent.
• Pay processing fee (usually non-refundable) and any valuation/ legal charges if levied separately.
• Get your Application Reference Number and a document checklist from the lender.

Step 5: Approval and Sanction

It takes a few days or weeks to get your loan sanctioned, as lenders will verify all the documents and information submitted by you.

• Lender evaluates borrower’s income stability, FOIR/ DTI, existing liabilities, and credit profile.
• If your loan request is approved, you will receive a Sanction Letter with the loan amount, interest rate type (floating/ fixed), repayment tenure, EMI, fees, conditions precedent, sanction’s validity (usually 30 - 90 days).
• Review all terms and conditions mentioned in the sanction letter carefully. Ask for rate concessions. Many lenders offer concessions in interest rates for home loan for women borrowers/ co-owners.

Step 6: Legal and Technical Due Diligence

This is required to check the authenticity and accuracy of the documents and information provided by applicants.

• Legal: Title search (typically 12 to 30 years chain), Encumbrance Certificate, encumbrances/ charges, NOCs, society share, conversion/ land-use, and litigations.
• Technical: Property valuation, property age/quality, adherence to sanctioned plan, carpet/ super built-up verification, locality and marketability.

Step 7: Execute Agreements and Mortgage Setup

This step involves:

• Agreement to Sale/ Builder-Buyer Agreement: Sign the agreement after clarity on price, payment schedule, and possession timeline.
• Down payment: Pay your margin money as per the schedule, keep bank emails/ receipts.
• Registration Charges and Stamp Duty: Book a slot and carry all originals, pay stamp duty and registration charges (may vary from state to state, collect the registered deed and Index/ Certified copy.
• Equitable/MODT mortgage creation: Make deed deposit and complete franking/MODT registration as per state practice. Pay any CERSAI charges. Usually, lenders guide borrowers in this regard. 
• Submit original property papers to the lender for safekeeping.

Step 8: Disbursement

Disbursement may happen in stages or in a lump sum.

• Ready-to-move/resale (full disbursement): Lending institution issues a Demand Draft/RTGS to the property seller during/after registration if all conditions are met.
• Under-construction (staggered/CLP): For under-construction properties, disbursements happen stage-wise against builder demand notes and the engineer’s progress report. You pay Pre-EMI (interest-only) until full disbursal, and full EMI starts after final disbursal/ possession as per lender policy.

Step 9: Repayment:

After the loan is disbursed, the repayment process will start. 

• NACH/ECS mandate for EMI
• Property insurance (structure cover) is often required
• Credit life is optional (usually, a term plan is more cost‑efficient)

Step 10: Possession and Post-Disbursement Tasks

May vary depending on property type.

• For new builds: Take possession letter, snag list and rectification, OC/CC as applicable, and handover kit (includes warranty manuals, keys, and plans).
• For societies: Apply for share certificate/ transfer, update municipal records & utilities.
• Collect interest and principal payment certificates annually for tax filing and claiming rebates.