A Guide to Home Loan for First-Time Buyers

09^th Oct 2025...

Buying your first home marks a significant chapter in your life. It’s the years of saving, planning and dreaming about a space to call your own. The process is both exhilarating and nerve-wracking. From envisioning your ideal home to navigating the complexities of loans, the journey is both exciting and challenging. And securing a home loan is an essential part of making this dream a reality.

About home loans

Home loans allow you to purchase your home by spreading the financial burden over manageable monthly payments. While the idea of taking on debt can feel overwhelming, but these are specifically structured to support you. They offer affordable interest rates and repayment options based on your financial capacity.

Benefits of home loans

Makes payment more manageable with monthly EMIs

Home loans allow you to buy a house by paying for it in instalments, rather than paying a large sum all at once. This makes homeownership more accessible.

Repayment can be done over the years

Home loans have a long repayment tenure, which typically ranges between 15 and 30 years. This spreads out your payments over time, reducing financial burden.

Tax benefits that reduce your overall burden

Section 80C: You can get up to ₹1.5 lakh deducted from your taxable income for the principal amount you repay on your home loan. This also covers stamp duty and registration charges. It applies only after the construction is complete and you have the possession of your home.
Section 24(b): If you are paying interest on a home loan, you can claim up to ₹2 lakh per year as a tax deduction if you live in the house. This applies when the construction or purchase of the house is completed within five years of taking the loan.
Section 80EE: First-time home buyers can get an additional ₹50,000 deduction on interest, provided the loan is ₹35 lakh or less and the house is valued at ₹50 lakh or less.

How to choose the right home loan?

Choosing the right loan and understanding its terms can make the process smoother. Here are some factors you should consider as you take this major step toward homeownership:

Interest: There are two kinds of interest rates, namely fixed and floating. The former remains constant throughout the loan period. On the other hand, floating interest rates vary with market conditions. EMIs may drop if rates fall, but they could rise if rates increase.
Processing fees: Lenders charge processing fees (0.5% to 2% of the loan amount), administrative costs and prepayment penalties. So, it’s always recommended that you check them to avoid extra costs.
Loan to Value Ratio (LTV): Lenders usually provide finance up to 80-90% of the property’s value. This requires you to cover the remaining as a down payment. So, make sure you’re comfortable with this contribution.

Additional tips

Government schemes

Pradhan Mantri Awas Yojana (PMAY) is a scheme that offers a discount on home loan interest rates for certain income groups. You can get a subsidy of 3-6.5% on your loan. This reduces your monthly loan payments and makes owning a home more affordable. Then, there is Credit-Linked Subsidy Scheme (CLSS), a part of PMAY, which directly cuts down your interest rate. This helps you handle your monthly payments more easily.

Benefits for women

Banks offer women slightly lower interest rates (0.05% to 0.1% less). This can save a lot of money in the long run, especially if you take out a large loan. Some states further give women lower stamp duty rates (usually 1-2% less). This reduces the overall cost of buying a home. If women apply as co-borrowers, it increases the chances of loan approval, especially when combining their income with their spouse’s income.

Eligibility for home loans

Your income, credit score and age determine if you can get a home loan or not. A good credit score (above 750) makes it easier to get approved and get better interest rates. Check if you pre-qualify for a pre-approved home loan. This is based on your credit score, income and financial history. It means you're eligible for a certain loan amount before even selecting a property.

Conclusion

It is also important to note that the property type and its location will also affect your home loan application and approval process. So, before you fixate on a property, ensure that you have understood the lender’s criteria beforehand to avoid delays or rejection in your loan process.