It is a dream for many to move away from their rented dwellings into a space that they can call their own. Buying or constructing a house is a once in a lifetime experience, which makes it essential that buyers have a hassle-free experience. A home construction loan provides buyers with funds to finance and build an entirely new house that is different from a home loan, that provides funds to buyers to purchase already built houses.
Home construction loans are deemed high-risk investments for lenders, and the buyers are required to possess a healthy credit score with almost zero payment defaults in the past. No lender funds the entire construction cost, and an initial down payment of 10%-25% of the proposed construction amount may be required, depending upon the lender’s specifications and the total proposed amount.
A home loan calculator may provide you with a better picture regarding the eligibility, EMI, and the affordability of a home construction loan. Let’s have a look at the eligibility criteria and the documents required for getting a home construction loan.
Home Construction Loan Eligibility and Documentation
The process of disbursement of a home construction loan is slightly different. Since a home construction loan is a risky investment for lenders, they want to ensure that the amount they lend will be returned and won’t turn into an NPA.
A home construction loan is a secured loan that requires buyers to produce KYC documents along with property papers that establish your ownership of the land. This is to ensure that you are the rightful owner of the plot and have the right to pursue construction activities in the area.
A home construction loan is disbursed in stages, depending upon the construction progression.
However, the loan won’t be disbursed until the buyer puts forth the required down payment. The disbursal period is entirely dependent on the construction speed, the faster the house is constructed; the faster would be the loan disbursal.
The borrower is also required to submit the construction layout, certified by a Civil engineer or an Architect, and an estimate of the total construction cost. If all the documents are submitted, and the lender is satisfied, the loan amount is approved. Let’s have a look at the various documents required for availing a home construction loan approval.
- KYC Documents (Aadhar, Voter ID, Driving licence, etc.)
- Income Documents (Bank statements, Savings Records, Salary slips, etc.)
- Property Documents.
- Construction plan that is approved by a Civil engineer or an Architect.
The amount that is required to construct a house is usually lower than purchasing a house outright. This makes it attractive for homebuyers to consider opting for a house construction loan. You must choose the right home loan provider that offers the lowest home loan interest rate and lays out the eligibility criteria precisely.
Buyers need to vary that a home construction loan is offered only when all the eligibility parameters are fulfilled, and the necessary supporting documents are provided. Owning a house is a dream for many, and a house construction loan can make this dream come true.
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