People across the globe associate homeownership with financial stability. It’s no surprise that homeownership ranks high among life goals for people around the world. Central and state government housing schemes and various home loan schemes run by NBFCs help millions of people realize their dream of becoming homeowners. Before we go any further, let us explain the meaning of affordable homes. 

What is Affordable Housing and How Can You Avail of an Affordable Home Loan? 

Affordable housing or affordable homes are low-cost homes designed keeping in mind the budget of middle- and lower-income individuals. These homes are not lavish but are designed to meet the basic amenities and comfort requirements of the owner. Security is another aspect that these homes cater to. If you fall under the broader categories of lower-income or middle-income groups, you must check if you are eligible to apply for government home finance schemes, such as PMAY and CLSS, that offer home loans at highly subsidized interest rates along with flexible terms and conditions and repayment tenor, making loan repayment easy and stress-free. Alternatively, we will also discuss some other tips on what borrowers can do to secure an affordable home loan. 

Affordable Government Housing Loan Schemes 

1. Pradhan Mantri Awas Yojana (PMAY) – Urban 

PMAY Urban focuses on offering affordable home loans to individuals living in urban areas and belonging to economically weaker sections (EWS), low-income groups (LIGs), and middle-income groups (MIGs). Other than financial assistance, under this category, home loans are offered at low interest rates, making loan repayment easy.  

2. Pradhan Mantri Awas Yojana (PMAY) – Gramin 

Under this scheme, the Government of India offers home loans to individuals living in rural areas who want to build a pucca house. Homeless people, people living in kutcha houses, manual scavenger families, people belonging to the SC/ST category, and households without a proper home are sanctioned loans under this category. 

3. Rural Housing Interest Subsidy Scheme 

Under this scheme, the government of India offers home finance at the lowest home loan rates to individuals who want to construct or repair their homes. Everyone eligible under PMAY can also apply for home finance under this scheme. 

4. HUDCO’s Individual Housing Loan Scheme

The Housing and Urban Development Corporation (HUDCO) is a government-owned entity that offers housing loans to economically weaker sections (EWS) and low-income groups (LIGs). These loans are sanctioned at low home loan rates and are, therefore, easy to repay. 

5. Credit-Linked Subsidy Scheme (CLSS)

CLSS is also a component of the PMAY. Through CLSS, the Government of India offers home loans at subsidized home loan interest rates. 

Other than these central-run affordable home loan schemes, homebuyers must also check their eligibility for affordable home loans sanctioned by various state governments. If you do not qualify for any of the schemes above, do not worry. Here are some simple tips that will secure the lowest home loan rates possible.

How to Find and Secure an Affordable Home Loan: Top Tips for 2024

1. Apply for a home loan with a credit score above 750. Such a credit score indicates excellent repayment capacity and creditworthiness. People with a CIBIL score in this range are easily able to secure a low home loan interest rate. 
2. Maintain stable employment and jobs. Individuals who frequently switch jobs or have unstable incomes are more likely to default on loan repayments. In contrast, those with stable incomes and employment rarely default, allowing them to secure loans with favorable terms, including lower interest rates.
3. Maintaining a low debt-to-income ratio is important too. A high debt-to-income ratio or FOIR indicates an excessive dependency on credit and a low ability to repay it on time. If you want to secure a low interest rate in India, you must never let your debt-to-income ratio exceed 40% of your total income.

4. Pay a higher down payment and reduce the LTV ratio. High-value loans increase the risk for the lender and therefore, attract higher interest rates. In contrast, low LTV ratio loans are seen as less risky deals by lenders and therefore, these loans are sanctioned at low home loan interest rates and other beneficial loan terms and conditions. Additionally, while having all the home loan documents may not help you negotiate for a low home loan interest rate, it will certainly help you navigate the whole process smoothly and quickly.