Buying a home is one of the biggest dreams for most families. But for many, it is not possible to pay the full price at once. That is where a home loan comes in. Over the years, I have seen many people apply for home loans—some get approved quickly, while others face delays. In this guide, I will explain everything in simple words: what a home loan is, how interest rates work, how EMI is calculated, what documents you need, and how to get approval faster.
What Is a Home Loan?
A home loan is money borrowed from a bank or financial company to buy or build a house. You repay this money in small monthly parts called EMI (Equated Monthly Installment).
The bank gives you the money upfront.
You pay back in monthly installments over a fixed time (like 10, 15, or 20 years).
The bank charges interest on the loan amount.
Think of it like this: the bank helps you buy your home today, and you slowly pay them back over time.
Types of Home Loans
Not all home loans are the same. Depending on your need, banks offer different types:
Home Purchase Loan – For buying a new or resale house.
Home Construction Loan – For building a house on your own land.
Home Improvement Loan – For renovation, repairs, or upgrades.
Home Extension Loan – For adding extra rooms or floors.
Balance Transfer Loan – If another bank offers lower interest, you can transfer your loan.
Plot Loan – For buying land to build a house later.
Tip: Always choose the loan type that matches your exact need. Don’t take extra loan amounts you don’t require.
Home Loan Interest Rate Explained Simply
The home loan interest rate decides how much extra money you pay to the bank.
There are two main types:
Fixed Rate – Interest stays the same throughout the loan period. Good for people who want stability.
Floating Rate – Interest changes based on market conditions. It can go up or down.
Example:
Loan amount: ₹20 lakh
Interest rate: 8% per year
Tenure: 20 years
Here, the interest is what makes your EMI higher. Even a small difference in interest rate (like 7.5% vs 8%) can save you thousands over the years.
Advice: Always compare interest rates from at least 3–4 banks before choosing.
How Home Loan EMI Is Calculated (Example)
EMI (Equated Monthly Installment) is the fixed amount you pay every month. It includes both principal (loan amount) and interest.
The formula is:
Where:
= Loan amount
= Monthly interest rate (annual rate ÷ 12 ÷ 100)
= Number of months
Example:
Loan amount: ₹20,00,000
Interest rate: 8% per year (0.0067 per month)
Tenure: 20 years (240 months)
Using the formula, EMI comes to around ₹16,700 per month.
So, if you take a ₹20 lakh loan, you will pay ₹16,700 every month for 20 years.
Tip: Use online EMI calculators before applying. It helps you plan your monthly budget.
Eligibility Criteria for Home Loan
Banks check your home loan eligibility before approving. They want to be sure you can repay.
Main factors:
Age – Usually 21–60 years.
Income – Stable monthly income from job or business.
Credit Score – A score above 700 is considered good.
Job Stability – At least 2–3 years of work history.
Existing Loans – Fewer loans mean higher chance of approval.
Property Value – The house should have clear legal papers.
Advice: If your income is low, apply jointly with your spouse or family member. It increases eligibility.
Documents Required
Banks ask for documents to check your identity, income, and property. Common ones are:
Identity Proof – Aadhaar, Passport, Voter ID.
Address Proof – Utility bill, rental agreement.
Income Proof – Salary slips, bank statements, ITR.
Employment Proof – Offer letter, company ID card.
Property Papers – Sale agreement, builder NOC, land records.
Photographs – Passport-size photos.
Tip: Keep all documents ready in a file. Missing papers cause delays.
Tips to Get Home Loan Approved Faster
From my experience, here are practical tips:
Check your credit score first – If it’s low, improve it before applying.
Apply to 2–3 banks at once – Don’t wait for one bank’s decision.
Choose shorter tenure if possible – Banks prefer faster repayment.
Show extra income sources – Rental income, side business, etc.
Avoid job changes during application – Stability matters.
Pay off small loans first – It improves your debt-to-income ratio.
Keep property papers clear – No legal disputes.
Remember: Banks want safe borrowers. Show them you are reliable, and approval will be quick.
FAQs
What is the minimum salary for a home loan?
Most banks want at least ₹25,000–₹30,000 monthly income. But it depends on city and loan amount.
Can I get a home loan without a job?
It is very difficult. Banks need proof of income. If you are self-employed, show business income records.
What is the maximum tenure for a home loan?
Usually 30 years. But shorter tenure means less interest.
Can I prepay my home loan?
Yes. Most banks allow part-prepayment or full repayment. Check if there are charges.
How much home loan can I get?
Banks usually give 70–80% of property value. The rest you pay as down payment.
Does credit score affect home loan interest rate?
Yes. Higher score means lower interest rate offers.
Final Advice
A home loan is not just about money—it is about planning your future. Always check the home loan interest rate, calculate your home loan EMI, and understand your home loan eligibility before applying. Keep documents ready and follow the tips above to get approval faster.
I have seen many families succeed because they planned well. If you prepare properly, your dream home will not be far away.