Buying your first home in India involves roughly a dozen decisions, and most first-time buyers make them in the wrong order. They find a property, fall in love with it, and only then discover what the bank will actually lend. This guide runs the sequence the way it should be run.
Step 1 — Find your real budget before you look at anything
Two ceilings decide what you can buy, and you get the lower of the two.
The first is income. Lenders cap the share of your net monthly income that can go toward EMIs — the Fixed Obligation to Income Ratio, or FOIR — at roughly 50% to 60%. If you take home ₹1,20,000 a month and already pay ₹10,000 in car loan EMIs, a 50% FOIR leaves ₹50,000 for a home loan EMI, which supports about ₹58 lakh over twenty years at 8.5%.
The second is the property. The RBI-linked loan-to-value norms cap the loan at 90% of the value for property under ₹30 lakh, 80% up to ₹75 lakh, and 75% above that. On a ₹90 lakh flat the bank funds ₹67.5 lakh and you find ₹22.5 lakh, plus charges, from your own pocket.
Run both together in the home affordability calculator before you visit a single site.
Step 2 — Budget the 10% that is not the price
The sticker price is not the cost. On an ₹80 lakh property in a typical metro you should expect:
- Stamp duty: 4% to 8% depending on the state — about ₹4.8 lakh in Maharashtra at 6%
- Registration: roughly 1%, capped in some states
- Brokerage: 1% to 2% where an agent is involved
- GST: 1% for affordable and 5% for other under-construction property; nil on ready properties with a completion certificate
- Society transfer, legal and documentation charges: ₹25,000 to ₹1 lakh
- Interiors and moving: almost always underestimated
None of this can be financed. Work out your state's figure with the stamp duty calculator.
Step 3 — Fix your credit score first
A score above 750 gets the lender's floor rate. Between 700 and 750 you will be approved but priced higher, and on a ₹50 lakh, 20-year loan even 0.5% of extra spread is about ₹3.5 lakh in interest. Pull your report, clear card balances to below 30% of the limit, and do not apply for anything else in the three months before your home loan application.
Step 4 — Get a pre-approval, then shop
A pre-approval or in-principle sanction is a lender's written statement of how much they will lend you, usually valid for three to six months. It costs a small fee and it changes the conversation entirely: you negotiate as a buyer who can close, not one who is still hoping.
Step 5 — Verify the property before you pay anything
Your bank's legal and technical team will check the title, but they are protecting the bank's security, not your interests. Independently confirm the chain of title, the approved building plan, the occupancy certificate on a ready property, RERA registration for anything under construction, and that property tax and society dues are clear.
Step 6 — Choose the tenure with your eyes open
The EMI difference between fifteen and twenty years is usually modest; the interest difference is not. On ₹50 lakh at 8.5%, twenty years costs about ₹54 lakh in interest against roughly ₹38.5 lakh over fifteen — ₹15 lakh for the comfort of a smaller monthly figure. Take the shortest tenure whose EMI you can service without stress, and use prepayments to shorten it further.
Step 7 — Understand what happens after disbursal
On a floating-rate loan the rate resets with the repo rate. Most lenders keep your EMI constant and change the tenure instead, which quietly adds years. Ask for a rate-reset letter each time, check your annual statement against your own amortisation schedule, and remember that the RBI bars prepayment charges on floating-rate loans to individuals — so putting your bonus into the loan every year costs you nothing.
Common first-time mistakes
- Emptying every account for the down payment. Keep six months of EMIs in reserve. A job change or a medical bill in year one is what turns a good purchase into a distressed sale.
- Taking the dealer of finance the builder recommends. Builder tie-ups are convenient and rarely the cheapest. Get your own sanction and compare.
- Choosing the lowest EMI. The lowest EMI is almost always the longest tenure. Compare total interest, not monthly outgo.
- Ignoring the tax regime question. Home loan deductions exist only under the old regime. If you are on the new regime, a home loan carries no tax benefit at all on a self-occupied property — check with the tax benefit calculator.
Frequently asked questions
At a 50% FOIR with no existing EMIs, a ₹50 lakh loan over 20 years at 8.5% needs an EMI of about ₹43,400, which implies a net monthly income of roughly ₹87,000. Lenders applying a 60% FOIR would accept around ₹72,000.
10% for property under ₹30 lakh, 20% up to ₹75 lakh and 25% above that, because of loan-to-value caps. Stamp duty and registration are additional and must also come from your own funds.
Ready property carries no GST and no completion risk, but costs more. Under-construction is cheaper and attracts 1% or 5% GST, with delivery risk — only buy RERA-registered projects from developers with a delivery record.
Usually. A co-applicant with income raises eligibility, and where both are co-owners and co-borrowers each can claim the interest and principal deductions separately under the old regime, doubling the tax benefit.