A Step-by-Step Guide to Buying Your First Home in India (with a Home Loan)

Published on: July 16, 2025

Buying a home is exciting but involves many steps. From deciding how much you can spend to finally getting the keys, each stage matters. This guide walks you through all the key steps – budgeting, loan eligibility, lender selection, pre-approval, property search, legal checks, paperwork, loan processing, sale registration, and possession – so you can go from dreaming of a house to owning one.

1. Budgeting and Financial Planning
Before you start looking at properties, set a realistic budget. A common rule of thumb is that your home’s price should be no more than about 5 times your annual income, and your EMI (loan instalment) should stay within ~30% of your monthly income. Factor in at least 10–20% of the property’s cost (or more) as a down payment – RBI guidelines let banks lend up to 90% of a home’s value (for loan ≤₹30L), so you must pay the rest from savings. Also plan for extra costs like stamp duty (typically 4–10% of property value) and registration fees (~1%), plus legal fees or renovation.
• Budget tips: Calculate how much you can save each month, and use online EMI calculators to see what loan you can afford. Try to keep EMIs ≤30–40% of your take-home pay.
• Down payment: Save at least 10–20% of the home’s price (RBI allows loans up to ~90% for properties under ₹30L, meaning 10% must come from you, not counting taxes). More savings or prepayments lower your interest cost.
• Emergency fund: Keep 6–12 months’ living expenses aside, so loan EMIs don’t strain your household budget during emergencies.
2. Check Your Home Loan Eligibility
Next, understand how much loan a bank will give you. Eligibility depends on your age, income, employment, credit score, existing debts, etc. For example:
• Income & co-applicants: Higher income lets you borrow more. You can add a co-applicant (spouse, parents, even a sibling) to boost total income and increase the eligible loan amount.
• Credit score: Banks and HFCs expect a good credit history (750+ CIBIL score is ideal). A strong score (no defaults or late payments) makes approval easier and secures a better interest rate.
• Age and tenure: Lenders typically finance people aged 21–70. Younger borrowers get more tenure options, but longer tenures mean paying more interest overall. Decide on a tenure that keeps EMIs comfortable but pays off the loan in a reasonable time.
Be realistic: banks compute your debt-to-income ratio and see if you can repay after accounting for living costs. You can usually check eligibility online via bank portals or financial sites. Many lenders also require that you sign the loan agreement, insurance, and other papers after approval as per RBI rules.
3. Choosing the Right Lender
Compare banks, Housing Finance Companies (HFCs), and NBFCs: each has pros and cons.
• Banks (e.g. SBI, HDFC Bank, ICICI, Axis) typically offer lower interest rates on home loans and a full suite of banking services (overdraft, multiple branches). However, banks often have strict eligibility criteria and lengthy processing – good CIBIL scores and thorough paperwork are a must.
• Housing Finance Companies (HFCs) (e.g. LIC Housing Finance, PNB Housing, DHFL) often have more flexible approval policies and faster processing, especially for customers with less-than-perfect credit. They may consider lower credit scores and informal income proofs, but their interest rates can be slightly higher than banks.
• NBFCs and smaller banks might approve loans for niche cases (self-employed with irregular incomes, new-to-credit borrowers), but compare their rates and fees carefully.
Shopping tip: Use loan comparison tools or ask family/friends for offers. Look at the total cost: interest rate, processing fee, prepayment charges, and any hidden fees. Also check if the lender offers any special first-time buyer schemes or government subsidies.
4. Getting a Pre-Approved Home Loan
Many lenders offer pre-approved or pre-sanctioned home loan offers. This means the bank has already done a preliminary check on your eligibility. The benefits are:
• Know your budget: You learn exactly how much loan you qualify for, so you can house-hunt within that range without disappointment. You “know your limit” before you even start looking.
• Negotiating power: Sellers and builders take you more seriously when you have a pre-approved loan. You can negotiate prices or get a faster deal, since the bank has already vetted your finances.
• Faster processing: The lender has checked your credit and basic docs upfront, so once you select a property, the final loan approval and disbursal happen faster than with a fresh loan application.
However, pre-approval isn’t the same as final sanction: it usually has a validity (often a few months) and may require you to pay a processing fee. Banks lock in your interest rate at approval, so if market rates fall later, you might not get that benefit. Pre-approvals are best if you are sure you’ll buy soon. For a formal definition, a pre-approved loan is essentially a conditional approval based on your income and credit.
5. Searching and Selecting the Property
With finance in hand, it’s time to find the home. This involves location, type, and practicality:
• Location & lifestyle: Choose an area close to your daily needs (office, schools, hospitals, shopping). Well-connected neighbourhoods with upcoming infrastructure often appreciate faster. Research crime rates, future development plans, and rentals in the area. “Location” hugely affects both quality of life and resale value. Builders and realtors often highlight nearby amenities – use those clues but verify independently.
• New vs. Resale: Decide if you want a ready-to-move home or an under-construction project. Ready homes give immediate possession and avoid construction delays, but may cost more per sq.ft. New projects (often RERA-registered) let you book early and pay in stages, sometimes at lower prices, but you may wait years for possession. Check the builder’s track record on timely delivery and quality. Resale homes can be cheaper and fully built, but check the property’s history and any joint-ownership issues.
• Property type & size: Choose the right type (apartment, villa, independent house) and size (1BHK, 2BHK, etc.) based on family needs. Also verify the actual area (many people confuse built-up area vs carpet area, which RERA now clearly defines to avoid surprises).
• RERA registration: All large residential projects must be registered under the Real Estate (Regulation) Act. Always verify the project’s RERA registration number on your state RERA website. This ensures the project is legal and gives you rights (e.g. maximum 10% booking amount before agreement, penalty for delays, etc.). Do not deal with unregistered developers.
6. Legal Checks and Due Diligence 【Due Diligence】
Before you pay or sign anything, verify all legal aspects of the property. Thorough due diligence protects you from future headaches:
• Title and Ownership: Obtain certified copies of the Title Deed and Sale Deed. Verify the seller is the legitimate owner. Check the property’s ownership history (chain of title) to ensure no disputes.
• Encumbrance Certificate (EC): Get an EC from the sub-registrar’s office, which shows any mortgages, liens, or claims on the property. A clear EC confirms there are no outstanding loans or legal issues against the property.
• Approvals and Building Plans: Ensure the building plan was sanctioned by the local authority and the construction follows it. Collect the Approved Building Plan and latest property tax receipts to confirm all dues are paid. For apartments, verify that the builder has obtained an Occupancy Certificate (OC) or Completion Certificate (CC) once construction finishe. Without a valid OC/CC, you cannot legally occupy the property.
• RERA compliance: Re-check that the project (if under construction) is RERA-registered. RERA portals list developer details, project status, and any complaints. Never proceed with an unregistered project.
• Pending Litigation: Search local court records or public notices (newspapers) for any ongoing cases on the property or builder. Ask the seller to declare any disputes.
• Encumbrance & No-Objection Certificates: If buying an apartment, ensure builder gives a No Objection Certificate (NOC) from the society and a No Dues certificate (all payments cleared). Verify any remaining government approvals (like environmental clearance for large projects).
When in doubt, hire a qualified real-estate lawyer or a reliable chartered surveyor to do these checks. This due diligence ensures you buy a home with a clean title and all legal permissions – it may delay the process a bit, but it safeguards your investment.
7. Gather Documentation and Apply for the Loan
Meanwhile, collect all documents needed for the loan application. Most lenders require (you can use bullet lists to prepare):
• Identity & Address Proof: PAN Card, Aadhaar Card, Passport, Voter ID, or Driver’s License. They may ask for multiple proofs of address (utility bill, bank passbook, etc.).
• Age Proof: Birth certificate, school certificates, passport (to confirm you are 18+).
• Income Proof:
o Salaried: Last 3–6 months’ salary slips and Form 16 (tax certificate) for the past 1–2 years.
o Self-employed: Audited Income Tax Returns (ITRs) for the past 2–3 years and financial statements (Profit & Loss, Balance Sheets) certified by a CA.
o Bank Statements: Last 6 months of bank account statements (salary account and other accounts).
• Proof of Other Income: Rental income, professional fees, etc. (to boost eligibility).
• Identity of Employer/Business: If recently employed, your offer letter or appointment letter; if running a business, the company’s registration documents.
• Property Documents: For the property you intend to buy: if it’s a new flat, submit the builder’s allotment letter or buyer agreement and receipts of payments made. If it’s resale, submit the chain of title documents (previous sale deeds) and a copy of the executed sale agreement. Also get the property’s Encumbrance Certificate, approved plan, and No Objection certificates as applicable.
• Photos & Forms: Passport-size photos of all applicants, and the filled home loan application form.
• Down Payment Proof: Evidence of your savings or contribution (bank statements showing accumulated funds) for the down payment.
Have these ready in advance. Missing papers can delay your loan. Note also that most banks charge a processing fee (~0.5–2% of loan amount), so keep a cheque or proof of payment handy.
8. Loan Processing and Sanction
Submit your loan application along with the above documents. The lender will follow these steps (banks like HDFC, SBI, ICICI etc., follow similar procedures):
• Document Verification & Credit Check: The bank’s team verifies all documents and inspects your credit history. They may contact your employer or visit the property. A healthy credit score and complete documents speed up approva.
• Loan Sanction: If approved, the bank issues a Sanction Letter. This letter spells out your eligible loan amount, interest rate (fixed or floating), tenure, EMI schedule, and other terms. Read it carefully – it’s a promise from the bank to lend you that amount.
• Sign Sanction Papers: You sign and return an acknowledgement. The bank may ask for a one-time processing/security fee at this stage. (This is separate from the processing fee for application – often called “processing fee” or “document verification fee”.)
• Legal & Technical Appraisal: The bank then conducts a final legal and technical check of the property. Lawyers verify that the title is clear (no hidden charges), and engineers evaluate the property’s value and construction quality. This may include checking if the builder has any existing mortgage on the property.
• Disbursal & Welcome Kit: Once satisfied, the bank disburses the loan amount. You will receive the loan agreement (mortgage deed) to sign, and a welcome kit with your loan account details and EMI schedule. From now on, your EMIs will start.
At this point, the home loan is officially yours. Keep copies of all loan documents and your sanction letter safely.
9. Signing Agreements (Sale & Mortgage)
With your loan sanctioned, you move to finalize the sale:
• Bank Loan Agreement: Sign the formal loan agreement (mortgage deed) with the lender. This legally pledges the property to the bank until repayment. Read all terms, especially foreclosure and penalty clauses.
• Builder/Seller Agreement: If you are buying an under-construction flat, you (and the bank) will sign the Builder-Buyer Agreement (BBA) and later the Sale Deed. RERA forbids paying more than 10% before this agreement, so ensure you haven’t overpaid. For a resale, you will sign the Sale Deed with the seller at registration.
Keep multiple copies of every document and receipt. It’s often wise to have a lawyer look over these agreements before signing. Once the sale deed is signed and registered (next step), the property legally becomes yours – subject to the bank’s mortgage until the loan is repaid.
10. Registration and Stamp Duty
Registering the property makes you the legal owner. Here’s how it works:
• Documents & Sub-Registrar: Visit the local Sub-Registrar’s office (where the property is located) with the seller. Bring identity proofs, the original Sale Deed draft, the bank sanction letter, PAN cards of all parties, and proof of payment of stamp duty. The lawyer or agent usually helps prepare the final Sale Deed for registration.
• Stamp Duty & Registration Fees: Pay the stamp duty (stamp papers) and registration fees. Stamp duty is a percentage of the property’s value (varies by state, usually 4–10%). Registration fee is typically around 1% of the value. These are mandatory: without paying them, registration won’t proceed.
• Signing and Witnesses: The buyer, seller, and two witnesses sign the Sale Deed at the Sub-Registrar’s office. The registrar verifies identities and documents, then records the transaction officially.
• Get Registered Deed: After processing (it may take a few days), you receive the Registered Sale Deed. This document, stamped by the government, is your proof of ownership.
All legal ownership transfers when the sale deed is registered. Keep multiple certified copies. After this, update municipal or local records (e.g. property tax Khata) in your name so future tax bills come to you.
11. Taking Possession of Your Home
Finally, it’s time to move in:
• Collect Essential Documents: If the property was newly constructed, make sure the builder hands over the Occupancy Certificate (OC), Completion Certificate (CC), and any No Objection Certificates (NOCs) (fire, water, electricity). Also get a No-Dues Certificate from the builder confirming you have paid everything required. If it’s a resale, ensure the seller provides all original documents, a copy of the sale deed (now registered), and that utility bills (electricity, water) are current.
• Inspection: Do a thorough handover inspection (the No Broker checklist is useful). Check structural items (walls, ceilings), plumbing/electrical work, paint/finishes, doors/windows, and fittings. Note any defects and get them fixed by the builder before or immediately after possession.
• Utility Transfers: Apply to transfer electricity, gas, and water accounts into your name. Update your address for all subscriptions (TV, internet, bank statements, etc.).
• Home Insurance: It’s wise to get home insurance (building and content coverage) once you move in, to protect against fire, theft, or natural disasters.
Once all keys, documents, and certificates are handed over and any initial issues are addressed, congratulations – you are a homeowner!
Final Tips
• Maintain Credit: Continue paying EMIs on time to build equity and avoid penalties. Good repayment history could let you refinance or get loans faster in future.
• Emergency Buffer: Keep a small “sinking fund” for maintenance or unexpected repairs.
• Stay Informed: Read and understand all loan documents, and keep track of the interest rate (you might switch between fixed/floating or transfer loans if a better rate comes).
Buying a home in India can be complex, but by taking one step at a time and staying organized, you can navigate the process smoothly. Plan well, verify everything, and ask questions whenever you’re unsure. With the right preparation, you’ll soon be settling into your dream home.
Sources: Authoritative home loan and real-estate guides were consulted for this step-by-step process. These contain details on budgeting, loan procedures, legal checks, and the Indian home-buying framework.