5 things to remember when applying for a home construction loan
Rajesh was finally ready to move into his own house. But after looking at a few properties, he decided to build his own home. The modern apartment complexes did not appeal to him. He bought a plot of land and opted for a home construction loan. Soon, his dream project was on its way. Being a banker, he was aware of the loan system. So, he knew that home loan transfer was an option. Keeping this in mind, he negotiated with the lender. Are you too are looking to construct a house of your own? Follow the tips mentioned below to get a loan easily.
Tips for getting quick approval for your home construction loan
- Arrange some funds: A home construction loan is a bit different from a regular home loan. You do not get the loan amount all at once. Instead, the lender disburses it in instalments. The intervals in the instalments and the value of each instalment depend on how your house construction is progressing. So, keep some funds ready to buy the initial raw materials, pay the labourers, and so on.
- Stick to the plan: You have to submit the plan of the house along with all the licensing documents to your loan provider. Only then will the lender approve your loan. But say you violate the licences. Maybe you increase the number of floors or stretch the boundary wall. Or, suppose you make modifications to the house plan. Perhaps you add an extra room. In all these cases, the lender will freeze your loan. Disbursal of the remaining instalments will not happen. So, stick to the original plan at all times.
- Home loan EMI: Like any other home loan, you have to pay EMIs each month for home construction loans. Keep in mind the home loan interest rate as well as your other expenses. This will help you fix a realistic EMI amount that you can afford. Many people opt for high EMIs because they wish to close their loan quickly. This can lead to defaults. It may also stall your future loan instalment disbursals. So, keep this in mind. Agree to a reasonable EMI that you can afford.
- Home loan transfer: Generally, in India, it is difficult to transfer home loans for properties that are under construction. Keep this point in mind when applying for a home construction loan. Choose the lender with the best interest rate. Remember, later on it will be difficult to transfer the loan if you feel the interest rate is too high.
- The correct documents: Finally, make sure you have all the documents in place. Lenders reject many home loan because of the submission of incorrect documents. The list of documents needed is always available on the lender’s website. Read it carefully and submit what the lender asks for. You will need to submit the following documents for your home construction loan:
- ID proof
- Proof of residence
- Income proof
- Contract of employment or your offer letter
- Bank statements (last 6 months)
- Plot title deeds
- Approved home plan
- Architect-attested construction estimate
- Cheque for processing fee
Getting a home construction loan
As you can see, it is not difficult to get a loan to construct your own house. Keep the above tips in mind and your job will become a lot simpler. Be systematic in your application. Submit the forms and documents carefully. Then pay the required fees. You will be on your way to building your dream home in no time.