A Step-by-Step Guide to Understand Home Loan Approval Process
Now that you have finally decided to realise the dream of buying your own home, it is time for you to start looking for the most suitable Home Loan offer. With multiple financial institutions offering various types of Home Loans, making a decision can be a tad bit challenging task.
To ease your home buying journey, here is a step-by-step guide to help you understand what goes behind approval of Home Loan application:
1. Suitable lender:
Before applying for a Home Loan, it is important that you undertake some research and identify the most suitable bank or NBFC, matching with your requirements. You can collect the necessary information through the internet or by visiting the branch office of the lender. Different lenders offer products for different types of customers. Thus they offer a varied range of Home Loan Interest Rates, loan amounts, tenure, processing charges, etc. So you must compare different offers on these parameters to ascertain which one is the best for you. When you apply to the right lender, chances of approval are good too.
2. Duly filled application and payment of processing fee:
A lot of applications are rejected because of incomplete information and data. This results in late application approval and delays the process. Thus always carefully fill the application form and ensure payment of the processing fee all along. The Home Loan application form has to be jointly completed by the main applicant along with the other co-applicants. Applicants also need to sign the form and affix their photographs on the form. Along with the application form, applicants need to pay the processing fee through cheque. The amount will be specified by the lender.
3. Credit score check:
All lenders assess each application before processing it further. They pull out a credit report of each applicant to assess the Home Loan eligibility. The lender will start processing the application only after ensuring that the credit score of the applicant and the co-applicants meets its credit policy. For instance, to be eligible for an SBI Home Loan, all applicants must have a CIBIL score of 750 or more.
4. Verification of documents:
Once the credit score has been verified, the lender will then begin the process of verification of the documents submitted. This includes checking the authenticity of KYC documents, income proof documents, financial reports, and salary slips. An official valuer will be sent by the lender to check the property and ascertain its market value. This process can take up to a couple of working days, and thereafter the lender will call all the applicants for a face-to-face discussion.
5. Background check:
Next, the lender will send an authorised agent to the home as well as the workplace of the applicant to conduct a background check. If required, the agent can verify some details from the neighbours as well. This step is carried out to ensure that the applicant has provided the correct information.
6. Issue of offer letter/ in-principal approval:
After the background check is complete and the report is as per the satisfaction of the lender, the offer letter will be issued. This offer letter is also known as “in-principal approval.” This letter consists of all the details pertaining to the Home Loan offer along with the terms and conditions. Applicants must check it thoroughly and raise any queries that they have.
7. The legal check:
The next step involves the checking of the property documents along with the legal report. This process is carried out by the legal department of the lender. During this process, the complete chain of ownership is verified, along with the authenticity of the documents. The report is then prepared by a lawyer stating that the property is free from any encumbrance or charge. The legal report is directly sent to the lender by the legal department, and the applicants do not have any role to play in it.
8. Technical check by the authorised agency:
Another agency will be appointed for conducting the technical check on the property. This report consists of the details regarding the quality of the construction and the layout of the property. It will also be checked if the local authorities have listed the property for any illegal construction. This process can again take a few working days, and the report will be shared with the lender directly.
9. Loan Agreement signing:
After completing these steps, the lender will finally call all the applicants for signing the Home Loan agreement. At this stage, applicants also need to deposit the margin money or submit evidence of payment already made to the seller as an advance.
10. Disbursal of the loan amount:
Once the loan agreement has been signed, the amount will be disbursed by the lender. This disbursal can be made through banker’s cheque or demand draft drawn in favour of the seller, or through bank transfer to the account of the seller.
11. Registration of the property and creation of equitable mortgage:
Now, on the day of the registration of the property, a representative from the lender will be present at the registration office. Once the property registration is complete, the representative will collect the original documents and will provide a copy of the property documents. Next day, all the applicants must reach the office of the lender and sign the documents and register for the creation of an equitable mortgage. The lender will then register a charge against the property with CERSAI.
12. Commencement of repayments:
Now, the loan repayment process will start according to the repayment schedule shared by the lender. Usually, the repayments commence from the next month after the registration of the property and the creation of an equitable mortgage.
Now that you know about the various steps involved in the approval of the Home Loan application plan accordingly and move your file swiftly as per your requirements.
Also Read: 20 Best Home Loan Providers in India
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