Purchasing a new home is a great step. The home loan process may, however, be confusing. We have too many rules, misunderstood terms, and tips that never seem to match up. Furthermore, down payments, EMIs, eligibility, and numerous other myths about buying a home loan may make things stressful. In this very detailed guide, we will dispel some home loan myths for first-time buyers.

So, you can start your home-buying journey with confidence and ease.

Myth 1: You Need to Pay a 20% Down Payment

Most individuals believe that you need to save 20 percent of the cost of a home in order to obtain a loan. That is not always the case, though. While 20% is common, many banks now give home loans in India with as little as 10% down payment. It is especially true if you are a first-time buyer or using government housing schemes.

Also, some housing projects are already approved by banks with easy financing options. So, if you have a steady income and can repay the loan, you don’t have to wait until you’ve saved 20%. It is more flexible than you might think.

Myth 2: A Low Credit Score Means You Can’t Get a Loan

Having a low credit score can make getting a loan harder. However, this does not necessarily imply that you will be rebuffed. Here is what you need to know:

• There are still banks that grant loans to individuals with low scores. However, the home loan interest rates in India might be a bit higher.
• Adding a co-applicant like your spouse or parent who has a better credit score can improve your chances.
• Non-banking financial companies (NBFCs) are often more flexible and offer loans designed for people with lower scores.

So, while a good credit score helps you get better deals, a low score does not close the door completely.

Myth 3: Only Salaried People Can Get a Home Loan

Salaried employees are not the only ones who are eligible for home loans. Individuals who are self-employed, freelancers, and business owners are also eligible. The most important metric is that you need to show a stable income.

In case you are self-employed, the lenders tend to demand the income tax returns, audited financial statements, or bank statements of 1 to 2 years. There are even gig workers and small business owners who have special loan options offered by some banks.

Myth 4: Loans Are Only for Ready-to-Move Homes

Many think banks only give loans for finished homes. However, that is not true. Banks and lenders also offer loans for:

• Homes still under construction.
• Buying land and building your own house.
• Renovations or home extensions.

The important thing is that the project and builder should be registered with RERA and approved by the bank. You can easily get a loan if you want to invest early in a project.

Myth 5: Lower EMI Means a Better Loan

A low EMI sounds good because you pay less each month, but here’s the catch. Lower EMIs usually mean you are paying off the loan over a much longer time. It adds up to paying a lot more in interest overall.

Instead of just focusing on the EMI amount, think about:

• How much total interest will you pay by the end of the loan?
• Whether you can make extra payments without any penalty.
• Whether the loan has a fixed or floating interest rate and how that affects your payments.

Sometimes, paying a bit more each month and finishing the loan faster can save you a lot of money in the long run.

Myth 6: You Can’t Pay Off Your Home Loan Early

Many first-time buyers think they must pay EMIs every year without any way to pay off the loan sooner. However, that is not true. Banks are not eligible to impose penalties for prepayment on floating-rate home loans to individuals.

Thus, you will be able to repay some of your loan earlier in less time and minimize interest if you get any bonus, raise, or additional income. Rules on minimum amounts or a brief wait period before your prepayment may exist in some of the banks. So, check the details.

Myth 7: You Must Buy Insurance from the Same Bank

Banks often suggest you buy home loan insurance through them, but you don’t have to. You can pick:

• A separate term insurance policy that covers your loan.
• Any licensed insurance company will provide a home loan protection plan.

Price, coverage, and flexibility are three aspects that should always be compared before deciding on what fits you the best.

Myth 8: Having Other EMIs Means You Can’t Get a Home Loan

Just because you are already paying EMIs on things like a car or personal loan does not imply that you cannot have a home loan. The primary consideration of banks is debt-to-income ratio (DTI).

The majority of lenders prefer that your total EMIs should not exceed 40 to 50 percent of your monthly take-home salary. That is why you can still qualify with this, even having current loans, as long as your earnings are sufficient.

Myth 9: All Interest Rates Are the Same

Not all people have the same house loan interest rates in India. They depend on things like:

• Credit score and repayment history.
• How much loan do you require.
• The nature and the place of property.
• Your salary and employment security.

You can get a better interest rate than what the company advertises by comparing different options or negotiating with your potential lenders.

Myth 10: Loan Processing Is Always Slow and Complicated

The process used to be slow once. However, now the loan processing has become faster due to advanced systems. Many banks now offer:

• Very minimal paperwork with online applications.
• Quick credit checks and instant pre-approval.
• Digital verification of documents.

It takes only 3 or 5 working days to get loan approval if you have all the necessary documents, such as proof of income, ID, and property papers.

Conclusion

Home loans are great tools that help you buy your own home. The myths about home loans usually make most home buyers worried about getting a loan. However, the loan processing has become easier in reality with quick approvals and digital systems. But you should compare all your options to make the right choice.

Are you looking for properties in Electronic City for your perfect home? Check out premium apartments with Reflections. Our projects have clear ownership and family-friendly designs perfect for your lifestyle needs. Our project is also RERA approved, with clear titles, which will also help you secure home loans quickly. Contact us for a detailed breakdown.

FAQs

Q: How much down payment should I plan for as a first-time buyer?

A: While 20% is common, many banks allow loans with just a 10% down payment, especially under housing schemes.

Q: Can freelancers or business owners get home loans?

A: Yes. Self-employed individuals can get loans by providing income proofs such as tax returns and bank statements.

Q: Will prepaying my loan save money?

A: Yes, prepayments reduce the total interest you pay and can shorten your loan tenure significantly.

Q: Are loan approvals still slow?

A: No. With online applications and faster processing, many loans are sanctioned within a week nowadays.