Millions of urban Indians today use home loans to buy the homes of their dreams. But not everybody is familiar with the house loan procedure. As a result, many loan requests are turned down, or borrowers find themselves in a difficult situation because they are unable to pay off their obligations.
In essence, a house loan is a sum of money granted to people by banks or Housing Finance Companies (HFC) in exchange for an Equated Monthly Instalment (EMI). The sum disbursed allows the homebuyer to purchase the property, but the asset remains the bank’s security until the loan is fully returned.
However, banks thoroughly verify the borrower and the property before the funds are given. Additionally, they evaluate the homebuyer’s loan eligibility, and even a small financial disparity might cause problems. As a result, the house loan application procedure is intricate and requires critical comprehension.
Home loan process: Forwarding a loan application
An official application to the bank is the first step in the process for a house loan. Additionally, the bank needs your personal information to review and determine your loan eligibility. Typically, banks will require the following paperwork:
- Identity proof
- Address Proof
- Age proof
- Proof of educational
- Employment details
- Proof of income
- Pan Card
- Property details
Home loan process: Payment of processing costs for loans
You will be assessed a non-refundable loan processing fee by your bank. Processing costs are typically 0.5 per cent to 2 percent of the loan amount charged by banks. Additionally, a Goods and Services Tax (GST) of 18% will be added to the amount. This sum is used by banks to start and continue the home loan procedure.
In an effort to draw in more customers, several banks recently started removing loan processing fees. You might try to obtain the advantage by negotiating with your bank. Not all banks, meanwhile, will be willing to give up the processing charges.
Home loan process: Applicant’s examination and confirmation
The bank will assess your situation and determine the amount you are qualified for after you have completed your application and the processing costs. Within two to three working days after filing your application, you will be expected to personally meet with bank representatives so they can assess your ability to repay the loan.
Following the in-person meeting, the bank will check all the information and references you submitted in your loan application. In order to verify the information you have provided in your application, bank staff will visit both your place of employment and your house. They will also examine your Credit Information Bureau (India) Limited (CIBIL) records to assess the borrower’s credit history.
Home loan process: A determination of repayment ability
The most important step in the mortgage application procedure is the verification of the borrower’s ability to repay. Depending on how pleased it is with your capacity to timely repay the principal (plus interest), the bank may approve or refuse your request for a house loan. If the bank grants a conditional sanction, all of the requirements must be met before the loan may be issued.
Home loan process: Verification of the property
The bank will check the subject property before disbursing the loan. Original copies of the title deed, the no objection certificate, and any additional papers the bank may request must be submitted. A legal investigation will be done on the property to make sure the title is uncontested and clear. The bank will also do an expert valuation of your property.
In the event of a property that is still being built, the bank will carefully examine the project’s location, as well as the stage, calibre, and progress of the work, and then assess the property using predetermined criteria. The bank assesses a property’s age, ownership, construction quality, upkeep, location, and legal clearances to determine whether it is ready to be sold or is being resold.
Bank-employed property valuators evaluate its worth in accordance with predetermined criteria and determine the loan amount that will be approved. Please be aware that the property itself serves as security for your home loan, which is a secured loan. Therefore, you won’t receive your papers back until the whole loan amount has been paid back.
Home loan process: Home loan sanction
The registration procedure for the house loan begins once all of the aforementioned criteria have been successfully completed. The legal documents must be written on stamp papers with the necessary denominations in a format that has been approved by the bank’s attorney. You will next need to send post-dated checks for the duration of the loan arrangement and sign it. After you sign the loan agreement, the procedure of disbursing your house loan will start. Your bank will disburse the loan money according to the kind of disbursal agreed upon (whether lump-sum or in instalments).
Housing News Desk is the news desk of leading online real estate portal, Housing.com. Housing News Desk focuses on a variety of topics such as real estate laws, taxes, current news, property trends, home loans, rentals, décor, green homes, home improvement, etc. The main objective of the news desk, is to cover the real estate sector from the perspective of providing information that is useful to the end-user.
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