What You Should Know Before Applying for a Home Loan to Purchase Flat

Updated on: 18 Jan 2024 // 5 min read // Home Loans
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Purchasing a home in the city of your work is one of the challenging as well as crucial financial decisions of your life. You would need to apply for a Home Loan and align your finances for the same.

A Home Loan is a long term financial commitment and repayments need to be well planned to lead a peaceful life. Given the various financial aspects pertaining to the purchase of a flat in a city of your choice, it is strongly advised that you consider the below-mentioned factors while zeroing in on a property that best suits your needs and preferences.

1. Price of the Property

Before you define the budget, you must understand that your Home Loan for flat purchase will only cover 80% of the price of the property. You will need to shell out the remaining 20% upfront as the down payment at the time of purchasing the property.

Secondly, you must remember that most banks only sanction a Home Loan, wherein your EMI does not exceed 60% of your monthly income.

Your Home Loan Interest Rate will also play a key role in deciding the actual amount you end up paying for your home over the years.

Considering these aspects, you should arrive at a budget and start hunting for options accordingly. You should compare the price of each property that you find attractive with others in the same area, and check whether you’re getting a good deal. You can take the help of online or newspaper property listings, as well as local brokers, to get a fair idea of the prevalent market prices.

2. Carpet Area of the Flat

More often than not, a property ad would highlight the built-up area, which is inclusive of shafts, elevator’s space, stairs, the thickness of walls, and other common areas of the building. Wherein, it is the carpet area that is the actual area of the apartment, i.e., area within the walls of the flat.

What many people are unaware of is that the built-up area can be up to 30% greater than the carpet area of the flat. Hence, before finalising an apartment deal, it is important to know the area for which you are paying the price. Yet another aspect of significance in this regard is the division of the price of common areas of the floor or the entire building.

3. Land Record

Next, it is important to conduct a background check on the land on which the residential apartment has been constructed. While the topography and the soil quality should be favourable for bearing the weight of the building, it is also crucial that the land is clear of any dues and is lawfully registered. Then again, it is important that you pay attention to the verification of the title deed before making any payment towards the purchase of the property. Understand the terms of ownership and obligations with respect to the same.

4. Legal Check of the Property

Simply analysing if the property has been registered for the construction of residential apartments may not be enough, especially in the current scenario, where builders are in a horde to develop properties and use them as cash cows. Hence, it is your onus to ensure that the property conforms to all legal requirements associated with the property, including but not limited to:

  • Approval/ NOC from Municipal Corporation
  • Approval/ NOC from Area Development Authorities
  • Approval/ NOC from the Water Supply Department
  • Approval/ NOC from Sewage Board

When you avail a popular product like SBI Home Loan, your bank will conduct these checks and validate the documents.

5. Apartment Possession

Make sure to understand the proposed timeline for the project as well as whether the builder is asking for a grace period. You must ensure that you have a written commitment duly signed and stamped by the developer, wherein any delays come with a valid explanation & compensation.

6. Financing Banks

Most residential projects enlist the banks that are willing to finance the flats offered by them. It may be in your interest to approach such banks for your Home Loan needs. They would ensure seamless and quick processing of the loan.

On the other hand, if you have a preferred product such as HDFC Home Loan, make sure your bank is willing to fund the particular residential project. Only once your bank has assured you of its support should you move ahead with the investment.

7. Builder-Buyer Agreement

At the time of the selection/ booking of the flat, your builder will ask you for a token amount, against which you will receive an allotment letter. Next, you will be required to enter a tripartite agreement with the bank as well as the builder for the remaining payment. At this point, you may need the help of a legal advisor to walk you through the details of the agreement and help clarify any doubts that you may have.

8. Location of the Flat

While the amenities of a new residential project may prove to be rather tempting, you should be wary of the location as well. Not only should it have good quality access roads, but should also be well-connected to public places like schools, hospitals, malls, etc. You are going to live at the property for a long time to come, and hence it should also be safe, with a respectable neighbourhood.

9. Additional Charges

You must make a note of any additional charges such as Home Loan processing fee that may be levied by the bank, during or after the disbursal of the loan amount. Then again, there are charges such as stamp duty and registration charges that you owe to the municipal corporation, complete with the applicable taxes. Make sure you are aware of all these charges beforehand and create your budget accordingly.

With all these points you are now aware of some of the most crucial aspects of purchasing a flat. In case of any further confusions or queries make sure to understand the same in detail with the help of your Home Loan advisor or your legal consultant. After all, it isn’t every other day that you make such a humongous purchase!

Also Read: Best Home Loan Providers in India

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