Applying for low-income home loans might seem like an unattainable task, but it's entirely possible with the right approach and knowledge. Understanding how to navigate the world of low-income house loans can open the door to homeownership, a dream for many.

This article will answer the question, “How can I buy a house with low income?” and give an overview of the eligibility criteria, along with the necessary property documents required for a home loan. By the end, you'll get valuable insights to take practical steps toward securing a home loan that fits your financial situation.

What a Home Loan Is and How It Works?

A home loan is a financial product offered by financial or lending institutions, allowing individuals to borrow money to purchase a house. The loan amount is then repaid over a set period, typically with interest. Home loans work by securing the property as collateral; if the borrower fails to make payments, the lender can take possession of the property.

To qualify, applicants must meet specific eligibility criteria, including income levels, credit history, and employment status. The process involves applying along with required property documents to the lender, who then assesses the application to determine loan approval and terms.

• Home Purchase Loans: Ideal for buying new or resale homes, offering flexible repayment terms. If approved, the lender may approve a loan of up to 90% of the property value.
• Home Construction Loans: Designed for individuals looking to construct their homes on owned land, catering to unique construction costs. The loan amount is generally dependent on the approximate cost of construction and is disbursed in instalments as the construction progresses.
• Home Improvement Loans: For renovating or repairing your existing home, these loans cover a wide range of improvement expenses.
• Home Expansion/Extension Loans: If you're planning to expand your home, these loans finance the addition of rooms or spaces.
• Balance Transfer Loans: Beneficial for borrowers seeking better interest rates or terms by transferring their existing home loan to a new lender.

These diverse home loan types in India empower individuals from different financial backgrounds and needs to achieve their dream of homeownership or property investment.

Home Loan Options Available for Low Income

The answer to the question of how to get a home loan with low income often lies in finding lenders that cater to lower-income brackets and offer flexible loan terms. Here are some home loan options for low-income borrowers:

• PMAY (Pradhan Mantri Awas Yojana): Government schemes like PMAY help prospective homeowners to buy a house with low income. Under PMAY, eligible beneficiaries can receive interest subsidies on home loans, which can significantly reduce their monthly payments. The interest subsidy can go up to INR 2.67 lakhs, depending on the borrower's income category and other criteria. The tenure can extend up to 20 years, making it a viable home loan option for low-income borrowers.
• Rajiv Awas Yojana: The Rajiv Awas Yojana aimed to help the urban poor by providing financial support to build affordable homes. It focused on improving slums and encouraged partnerships between the government and private developers for better housing solutions.

Preparing for the Home Loan Application: Eligibility

• Nationality: Must be an Indian citizen living in India.
• Age: Your age must be between 21 and 65. Age at loan maturity is taken into account.
• CIBIL score: Aim for a score of 700 or above for favourable loan terms.
• Occupation: Open to salaried employees, professional individuals, and self-employed persons, offering a range of eligibility for diverse financial backgrounds.

Preparing for the Home Loan Application: Documentation Requirements

• Home loan application form: This must be duly filled.
• Passport-size photographs: An updated photograph must be submitted.
• Proof of identification (POI): Choose from an Aadhaar Card, PAN Card, Passport, Driving License, or Voter's ID Card.
• Proof of address/residence (POA): Options include a Passport, Ration Card, Account Passbook, Voter's ID Card, Utility Bills, or a letter from a recognized authority.
• Income documentation for salaried individuals: Form 16 or Income Tax Returns for the last 2 years, pay slips for the last 3 months, and account statements.
• Income documentation for self-employed individuals: Last 2 years' ITRs, balance sheet and profit & loss statement attested by a CA, business license or equivalent, professional practice license, registration certificate of establishment, and business address proof.
• Documents related to the property to be purchased: Sales deed, NOC from the housing society or the property owner, occupancy certificate (applicable for constructed apartments), stamped sales agreement, etc.

Organizing these documents beforehand can simplify your home loan application process.

How To Apply and Get Approved for a Home Loan With a Low Salary?

• Strong Application: Ensure your application is robust, including proof of income and identity, to demonstrate your repayment capability to lenders.
• Co-Applicant: To get a home loan with a low income, increase your loan eligibility by applying with a co-applicant, boosting the total income considered by lenders.
• Maintain a Good Credit Score: A high credit score, reflecting no default payments and responsible credit management, can significantly improve loan terms and increase your odds of getting a home loan on low income.
• Leverage Government Subsidies: Explore the "Pradhan Mantri Awas Yojana Housing for All" for interest subsidies under the CLSS, aimed at supporting economically weaker sections and low-income groups.
• State Government Subsidies: Investigate additional subsidies offered by state governments tailored to residents' needs. Remember, you cannot avail of both central and state subsidies simultaneously; choose the one that best fits your situation.
• Provide Additional Income Proof: In addition to your salary, consider including other sources of income, such as rental income, freelance work, or part-time jobs. Providing proof of additional income can strengthen your loan application.
• Opt for a Longer Loan Tenure: Choosing a longer loan tenure can help reduce the EMI amount, making it more affordable on a low salary. However, keep in mind that a longer tenure may result in higher overall interest payments.
• Maintain a Stable Employment History: Lenders prefer borrowers with a stable job history as it indicates a steady income. Avoid frequently changing jobs before applying for a home loan to demonstrate financial stability.

These steps can enhance your chances of securing a home loan with low income, making homeownership more accessible.

Government Schemes and Subsidies for Low-Income Families – PMAY and Beyond

Government Subsidies for Affordable Housing

The Pradhan Mantri Awas Yojana Housing for All provides interest subsidies under the Credit Linked Subsidy Scheme (CLSS) for various income groups:

• Economically Weak Sections (EWS): Households earning up to INR 3 lakhs annually can receive a subsidy of up to INR 2.67 lakhs for properties up to 30 sq. meters.
• Lower Income Group (LIG): For annual incomes up to INR 6 lakhs, the subsidy is also INR 2.67 lakhs for properties up to 60 sq. meters.
• Middle Income Group I (MIG-I): Families earning between INR 6–12 lakhs can avail of an INR 2.35 lakh subsidy for homes up to 160 sq. meters.
• Middle Income Group II (MIG-II): Households with INR 12–18 lakhs income get an INR 2.3 lakh subsidy for properties up to 200 sq. meters.

State Government Subsidies

In addition to central government subsidies, state governments offer various housing loan subsidies. Applicants must choose between central or state subsidies, as both cannot be availed simultaneously. These subsidies apply only to the first home purchase and cannot be claimed more than once by the same applicant. It’s important to note that the eligibility criteria and subsidy amounts may change over time.

Income Criteria at SMFG Grihashakti

Income criteria at SMFG Grihashakti are designed to ensure that applicants have a stable financial standing to qualify for a home loan. For salaried individuals, the minimum monthly salary required is INR 1,20,000 per annum. This criterion aims to ensure that borrowers have a consistent income flow to meet their loan obligations. Additionally, applicants must have been employed at their current job for at least one year, demonstrating job stability and a reliable source of income.
For self-employed individuals seeking a home loan from SMFG Grihashakti, the income criteria are based on the annual turnover and yearly profit after tax. The specific minimum amount required varies depending on the nature of the business and the industry in which the applicant operates. This criterion is essential for assessing the financial health of self-employed applicants and their ability to repay the loan.
By setting these income criteria, SMFG Grihashakti aims to ensure that borrowers have the financial capacity to manage their home loan repayments responsibly. Meeting these income requirements demonstrates financial stability and increases the likelihood of loan approval, enabling individuals to realize their dream of owning a home with the support of SMFG Grihashakti's home loan offerings.

Comparing Home Loans From Banks and NBFCs for Low Income

In India, there are two primary options for home financing: traditional bank loans and NBFC (Non-Banking Financial Company) loans. Each option presents distinct advantages for low-income borrowers seeking housing finance.

Traditional lending institutions may provide lower interest rates due to their direct access to RBI funds and customer deposits. They maintain strict transparency standards under RBI supervision and offer integrated financial services. However, their stringent eligibility criteria and extensive documentation requirements can pose challenges for low-income applicants.

NBFCs stand out due to their flexible lending approach. They accommodate borrowers with lower credit scores and accept diverse income sources. Eligible applicants can also benefit from competitive interest rates set by the NBFCs. Loan processing is typically quick, with simplified and minimal documentation, allowing for timely access to funds in times of need.

Conclusion

Comparing Home Loans From Banks and NBFCs for Low Income

In India, there are two primary options for home financing: traditional bank loans and NBFC (Non-Banking Financial Company) loans. Each option presents distinct advantages for low-income borrowers seeking housing finance.

Traditional lending institutions may provide lower interest rates due to their direct access to RBI funds and customer deposits. They maintain strict transparency standards under RBI supervision and offer integrated financial services. However, their stringent eligibility criteria and extensive documentation requirements can pose challenges for low-income applicants.

NBFCs stand out due to their flexible lending approach. They accommodate borrowers with lower credit scores and accept diverse income sources. Eligible applicants can also benefit from competitive interest rates set by the NBFCs. Loan processing is typically quick, with simplified and minimal documentation, allowing for timely access to funds in times of need.