What Does a Home Loan Process Include?
A few years ago, getting a home Loan approval was a time-consuming process. However, that is not the case anymore, as most reputable lenders accept online applications. Now, the Home Loan process has become quick and hassle-free, as long as you submit the required documentation.
The Process to Avail a Home Loan in India is not that convoluted or complicated. While each bank has its own process, the overall procedure remains the same.
1. Filling the Loan Application
The first step involves filling out the loan application form. You would have to fill details like:
- Full name
- Contact number
- Residential address
- Monthly or annual income
- Educational qualifications
- Employment details
- Details of the property for which you want the loan
- Cost of buying the property
- How much of your own money you intend putting up
You need supporting documentation along with the application form. These include:
- Age proof
- Income proof
- Address proof
- Identity proof
- Diplomas and degrees
- Bank statements
- Details of the employer
- Details of the property that you wish to buy
2. Paying the Processing Fee
After you submit the loan application and the necessary documents, you have to pay a fee to the bank to process your application. The bank uses this fee to maintain your loan account. Also, as a part of the processing your application, you would have to furnish your Income Tax declaration form and post-dated cheques. Depending on the bank’s policy, the processing fee can range anywhere from 0.25% to 0.50% of the loan amount.
3. Evaluating the Submitted Documents
The bank takes a couple of days to evaluate and assess the documents that you submit with your loan application. This is to ensure that you have not misrepresented facts. If this should happen, the bank will reject your application. Hence, it is essential you state the truth when filling in the form. It is possible that a bank representative may visit you at home or workplace to verify your details. Make sure you forewarn the references. The Bank representative may also visit your home to check your details.
Once the bank is satisfied with your application and documentation, the next step is approval or denial. In case the bank approves your application, they will sanction the Home Loan. The bank will formally inform you in writing the amount of loan they will sanction. If you accept the bank’s offer, you will receive a sanction letter. The disbursal of the loan can be conditional or unconditional. In conditional disbursal, you may have to fulfill a few conditions before the bank disburses the loan amount.
5. Processing Loan Offer Letter
The moment your bank approves the loan, you will receive a certified letter of offer that will contain the amount of loan that the bank has sanctioned, the interest rate, the loan tenure, whether the rate of interest is fixed or variable, the method of repaying the monthly EMIs (Equated Monthly Instalments), and the terms and conditions of the loan.
6. Accepting the Home Loan Offer
After you accept the official Home Loan offer, you need to countersign the duplicate offer letter and submit to the bank. Make sure you read the offer letter carefully and understand the terms and conditions. Also, check the interest rate. If you are unhappy with the rate, renegotiate it.
7. Processing Property Papers
After acceptance of the Home Loan offer, the bank focuses on the property. If you haven’t selected the property as yet, request for time to do so. You would need to submit the original property papers to the bank, and they will stay with your lender until you repay the full loan amount and interest. Your property papers function as collateral for the Home Loan. After you submit the original property papers, the bank will perform a legal check to ensure the sale process is valid and authentic.
8. Property Inspection
The bank will send a professional property analyser to check the property you are buying. The expert will review the stage of construction, whether the materials used are of good quality, how long it will take for the construction to complete, and whether the developer has the necessary permits and sanctions to carry out the construction. The property inspector will also value the property to ensure you are not paying too much and check the surroundings, as they have a bearing on the valuation.
On the other hand, if the home you intend to purchase is already constructed, the inspector will check the age of the property, how well it has been maintained, the surrounding area, the quality of construction, and whether there is an existing Home Loan on the property. After the technical inspection, the property inspector will provide the bank with the property’s estimated value. This ensures the bank does not increase its risk by lending you too much money.
Once the bank gets the property value estimate, it will get their lawyers to draft the loan documents. You will be invited to sign the loan agreement and submit post-dated cheques. You will have to hand over the original property papers to the bank when you sign the agreement. At this time, you will have to pay the stamp duty, which varies based on the state you are living in.
After signing the loan agreement, the bank will hand over a cheque to the developer for the loan amount. The bank will always make partial payments based on each stage of construction. Only if you are buying a ready-made property will the bank handover the entire loan amount to the seller.
The Bottom Line
While the Home Loan Process in India may look complicated, it is not as long as you have the right documentation. It is prudent to remember that the interest rate begins from the day the bank sanctions the loan. So, always look for a bank that offers a competitive interest rate.
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