Key takeaways
- Set your budget from an EMI you can pay every month, not from the largest loan on offer.
- RBI caps how much of the property value banks can lend, so plan your own contribution early.
- Keep cash aside for stamp duty, registration, fees and moving, which the loan usually does not cover.
- Check the title, the approved map and, for a new project, its UP RERA registration before paying a large advance.
- Compare the APR, rate type and prepayment terms in each Key Facts Statement before you sign.
Start with the EMI, not the loan offer
Lenders work out the largest loan your income can support. That number is a ceiling, not a target. Start instead with the EMI you can pay every month after household costs, school fees, insurance, other loans and savings for emergencies.
The tenure changes the cost a great deal. As an illustration, a ₹40 lakh loan at 8.5% a year costs about ₹34,713 a month over 20 years, with about ₹43.3 lakh in total interest. Over 25 years the EMI drops to about ₹32,209, but the total interest rises to about ₹56.6 lakh. Saving about ₹2,500 a month costs over ₹13 lakh more.
Try your own figures in our EMI calculator before you shortlist homes.
How much of the price the loan can cover
A home loan does not cover the full price. RBI caps how much of the property value banks can lend, called the loan-to-value (LTV) ratio. Other lenders follow the limits that apply to them, and any lender may fund less. For banks, the caps are:
- Up to 90% of the value for loans up to ₹30 lakh
- Up to 80% for loans above ₹30 lakh and up to ₹75 lakh
- Up to 75% for loans above ₹75 lakh
Plan your own contribution and the extra costs
The lender lends on the value its own valuer accepts, which can be lower than your agreed price. Say you agree to buy a ₹50 lakh flat. At 80%, the loan can be up to ₹40 lakh, so you pay ₹10 lakh yourself. If the valuer puts the flat at ₹48 lakh, 80% becomes ₹38.4 lakh and your share grows.
Ask the builder or seller for a full cost sheet in writing before you pay any token amount. Banks generally leave stamp duty and registration out of the property cost for the LTV limit, so plan to pay them from savings, along with other costs that first-time buyers often miss:
- Stamp duty and registration fees, set by the state government
- The lender’s processing fee, plus legal and valuation charges
- GST on an under-construction flat, which usually does not apply to a ready home with a completion certificate
- Maintenance deposits and parking or club charges in a builder project
- Home insurance, interiors, furniture and moving
Check the property before you pay a large advance
Lenders check the property as closely as they check you. A lawyer reviews the title and a valuer inspects the home. Check the same things yourself before you commit, and keep the property papers lenders usually ask for ready:
- A clear chain of ownership, with no pending loan or dispute on the property
- A building plan approved by the Lucknow Development Authority (LDA) or the relevant authority, and construction that matches it
- UP RERA registration for a new project, which you can check on the UP RERA website
- A completion or occupancy certificate for a ready home, where applicable
- For an LDA or Awas Vikas allotment, the allotment letter, the registered deed and freehold papers if the plot was leasehold
Ways to raise your eligibility safely
If the home you want needs a bigger loan than your income supports, a few steps can help. Check where you stand with the eligibility calculator first.
Many lenders require every co-owner of the property to join the loan as a co-applicant, and all applicants share the duty to repay. Useful steps include:
- Add an earning co-applicant, such as a spouse or parent, whose income the lender can count
- Close small loans or card dues first, so more of your income is free for the new EMI
- Check your credit report and get any errors corrected before you apply
- Choose a slightly longer tenure, knowing it raises the total interest
Understand the rate, pre-EMI and prepayment terms
Most home loans carry a floating rate that moves with the lender’s benchmark, and some lenders also offer fixed rates. When a floating rate rises, many lenders extend the tenure first. Ask whether you can raise the EMI instead, which usually saves interest.
For an under-construction flat, the loan is usually released in stages as the building rises. Until possession you may pay only interest on the amount released, often called pre-EMI. Read our answer on loans for under-construction homes.
Under RBI rules, lenders cannot charge for part-payment or foreclosure on a floating-rate home loan taken by an individual for personal use. Fixed-rate terms vary. Before you sign, compare the annual percentage rate (APR) and every fee in each lender’s Key Facts Statement.
Your first home loan, step by step
LoanBazzaar compares all major banks and loan providers and helps you prepare the papers lenders ask for, listed in our home loan document checklist. See how our home loan help in Lucknow works. The lender decides approval, the amount and the rate.
Most first purchases follow this order:
- Check your credit report and set an EMI budget
- Shortlist homes that fit the budget, and check their papers
- Apply with complete income and property papers
- The lender checks your credit and income, and runs legal and technical checks on the property
- Read the sanction letter and KFS, then sign the loan agreement and register the purchase
- The lender pays the seller or builder, in one go or in stages
Relevant loan assistance
Buying your first home in Lucknow?
Tell us about the property and your income. A LoanBazzaar advisor works out a realistic budget, compares all major banks and loan providers and lists the papers you need.
Sources
How we write our guides
The LoanBazzaar editorial team writes these guides around the questions borrowers ask us most, in plain language. We update them when rules or common lender practice change. Spotted an error or something out of date? Tell us.
