How to Apply for a Home Loan with Low Income?

Posted On August 16, 2024

Do you feel like owning a house is out of reach with your current salary?

With the rising real estate prices in India, many individuals with low incomes think that owning a home is unattainable.

However, there’s good news – it’s not impossible. The Indian government and different financial institutions have developed various programs and schemes to assist individuals facing similar challenges.

So, stay with us as we talk about the steps and options for obtaining a home loan with a low income. It’s more achievable than you may think!

Understand Your Financial Situation

Before starting the loan application process, it’s essential to evaluate your financial standing:

• Evaluate Your Income and Expenses: Start by calculating your monthly income and listing all your expenses. This will help you understand your financial capability and determine how much you can afford to pay as EMIs (Equated Monthly Installments).
• Review Your Credit Score: A good credit score can significantly improve your chances of getting a loan approved and securing a lower interest rate. Obtain your credit report from agencies like CIBIL and ensure there are no errors.
• Set Aside Funds for a Down Payment: Although some loans are available with a minimal down payment, having a larger amount saved can enhance your loan eligibility and reduce the total loan amount.

Explore Affordable Schemes

Pradhan Mantri Awas Yojana – Housing for All

The Pradhan Mantri Awas Yojana (PMAY) is one of the most significant initiatives that offers a home loan interest subsidy under the Credit Linked Subsidy Scheme (CLSS). This scheme is designed to cater to different income groups.

• Economically Weak Sections (EWS): This category is for households with an annual income of up to ₹3 lakhs. The maximum subsidy allowed is ₹2.67 lakhs, and the repayment tenure can be up to 20 years. Loans can be availed for properties with a carpet area of up to 30 square meters.

• Lower Income Group (LIG): This category caters to households with an annual income of up to ₹6 lakhs. The maximum subsidy remains ₹2.67 lakhs, with a 20-year repayment tenure. Loans can be utilized for properties with a carpet area of up to 60 square meters.

• Middle Income Group – I (MIG – I): Households with an annual income between ₹6 lakhs and ₹12 lakhs fall under this category. The maximum subsidy offered is ₹2.35 lakhs, with a repayment tenure of 20 years. Loans can be obtained for properties with a carpet area of up to 160 square meters.

• Middle Income Group – II (MIG – II): This category encompasses households with an annual income of ₹12 lakhs to ₹18 lakhs. The maximum subsidy is ₹2.3 lakhs, with a repayment tenure of 20 years. Loans can be availed for properties with a carpet area of up to 200 square meters.

State Government Subsidies

Apart from the central government subsidies, several state governments provide their schemes for low-income home loans.

However, applicants are only eligible to avail of one type of subsidy, so it’s crucial to make an informed decision based on individual needs and eligibility.

State government websites contain comprehensive lists of the various schemes available for applicants to consider.

Choose the Right Lender

Not all lenders have the same criteria or offer the same terms. Consider the following:

• Public Sector Banks: These banks frequently offer more favourable terms for low-income borrowers. Banks such as the State Bank of India (SBI) and Bank of Baroda (BoB) have specific schemes designed for economically weaker sections.

• Housing Finance Companies (HFCs): Companies like Housing Development Finance Corporation (HDFC) and LIC Housing Finance provide tailored products for low-income groups.

• Microfinance Institutions: For very low-income groups, microfinance institutions can be a feasible option. They offer small loan amounts with more flexible terms.

Strengthen Your Application

When applying for a home loan with a low income, you can enhance your application by:

• Considering a Co-applicant: It’s worth adding a co-applicant with a stable income, such as a spouse or parent, as this can significantly enhance your loan eligibility.
• Selecting a Lengthier Tenure: A longer loan tenure can lead to reduced EMIs, making it more manageable to handle monthly repayments.
• Offering Supplementary Collateral: Additional collateral, such as a fixed deposit or another property, can increase the likelihood of your loan being approved.

Prepare the Necessary Documents

Having all the required documents in order is crucial for a smooth loan application process. Common documents include:

1. Proof of Identity: Aadhaar card, PAN card, passport, or voter ID.
2. Proof of Address: Utility bills, rental agreement, or passport.
3. Income Proof: Salary slips, bank statements, and income tax returns.
4. Property Documents: Sale agreement, title deed, and property tax receipts.

Apply for the Loan

Once you have everything in place, applying for the loan can be done through either an online or in-person application:

• Online Application: Many banks and housing finance companies (HFCs) offer online application processes. You can fill out the application form on their official website, upload the required documents, and submit it electronically.
• In-Person Application: Another option is to visit the nearest branch of your chosen lender, where you can fill out the application form and submit it along with the required documents.
• Loan Processing and Approval: Following the submission of your application, the lender will review it, conduct a credit appraisal, and verify the property documents. If everything is in order, your loan will be approved, and you’ll receive a sanction letter detailing the loan amount, tenure, interest rate, and EMI.

By carefully assessing your financial situation, exploring affordable housing schemes, strengthening your application, and managing your loan wisely, you can bring your dream of owning a home to life.

Remember, persistence and thorough research are pivotal in finding the best home loan option that perfectly aligns with your financial needs.

With strategic planning and determination, you can make your homeownership dreams a reality.

Save Max Real Estate Brokerage has partnered with leading banks including SBI, HDFC, Bajaj Finserv, and ICICI to offer seamless home loan solutions. Contact us today and let our dedicated team connect you with these partners, ensuring you receive the best possible solutions lower interest rates.