A large proportion of home buyers in India opt for a home loan. They do so to not only to get aid in finance but also to reduce their risk. In this article, we present all that you need to know about home loans in India, but before moving ahead we need to understand the process of getting a home loan in the country.

In the first step, you need to make an application to the bank for a loan and provide them with your personal details along with all the documents.

The bank shall then charge a loan processing fee of anywhere between 0.5% to 1% of the loan amount for beginning the home loan process. Many banks also give a waiver on this amount to attract borrowers.

Within a few days of filing the application, the bank calls the borrower for a personal interaction to gauge his repayment ability. The process is completed only after scrutinizing his residence and workplace for verifying the details provided. Each bank checks the applicant's credit score. The applicant's credit score affects greatly his chances of getting a loan. It is after this process, bank declares the amount of loan that the borrower is eligible for.

The bank then offers you a home loan acceptance letter which states the amount of loan sanctioned, the rate at which it is sanctioned, the period of the loan, mode of repayment and all other terms and conditions.

The borrower needs to give an acceptance to the offer and pay certain administrative charges at this stage. Before disbursing the loan, the bank checks every detail about the property for which the loan is being taken and once the formalities have been satisfied does the bank start the loan disbursal.

Now a few things that you must know about the home loans in India are,

EMI is an important aspect that needs to be considered before opting for a home loan. It is the monthly outflow that will go towards repaying your loan for at least the next 10 to 15 years. As a thumb rule never let your EMI exceed 40 to 45% of your current net monthly income.

The Reserve Bank of India introduced a rate based on the banks' marginal cost of funds, called MCLR. It indicates a bank's marginal cost of borrowing and is used as a benchmark rate for setting the interest rate on bank loans. Banks can't lend below this rate.

If you took a loan between 1 April 2010 and 31 March 2016, it will have a base rate, in such a case when the repo rate is cut, it may take a long while for your loan to accrue the benefit. If you have taken your loan post 31 March 2016, your loan follows the MCLR regime.

The MCLR and spread vary across lenders, so you must compare the rates.

Principal repayment on a home loan entitles you to a deduction of ₹1.5 lakh a year under Section 80C of the Income Tax Act. Interest repayment fetches you additional ₹2 lakh annual benefit under Section 24(b) and a further Rs 50,000 under Section 80EE for first-time borrowers.

If you find that the financial institution is being rigid about the terms of the loan you can carry out a Home Loan Balance Transfer and shift to another lender.