In a densely populated country like India, having your own, safe haven, a peaceful abode is a dream for everyone. Most of the people in the country live in rented apartments or homes. This was the usual trend for a long time. But, with the boost in the real estate industry, people now have the options for buying a home of their choice.
However, the absence of a good deal of bank balance has kept the potential buyers or the needy ones from buying their dream homes. Here comes the advantage of home loan process. For those, who have a low budget and cannot afford to buy a home at once with their own bank balance, the home loan opportunity is a great way to buy a home in India.
If you are thinking of buying a home in India, here is a step by step guide to home loan process in India.
Step 1
The Application Process for Home Loan in India:
This is the first step for the home loan process if you are looking for a complete home loan process step by step. The applicant needs to file an application for the home loan amount to the bank or the financer. Here it is necessary to provide all of the necessary details of the applicant as the bank will need to scrutinize his/her eligibility to acquire the loan and financial standing. For that, the applicant needs to provide with the application the following documents. These include –
> Your age proof
> Identity proof
> Address proof
> Employment details
> Income proof
> Existing property details
Usually, the banks send their executives or representatives to the applicant for acquiring these details. But, in some cases or some banks may require the applicant to visit the financial institutes for submitting the application.
Step 2
Processing Fee
To continue the process of home loan approval, some banks charge you a processing fee. This is usually 0.25% to 0.50% of the total home loan amount and also, this is a non-refundable fee. But, not all the banks charge you this processing fee. Also, you can negotiate with the bank to reduce or excuse this processing fee.
Step 3
Verification of Repayment Capacity
This is the most important part of the home loan process in India or rather in any other country for that matter. Once the applicant has paid for the processing fees, the bank will start to verify the documents. For this, the bank will ask for a number of details from the applicant and verify and evaluate them to check the financial status and loan eligibility of the applicant. These details would include –
> The applicant’s bank balance
> Average savings
> Spending habits
> Number of check bounce – the more, the worse
> Investments if any – investments mean that the applicant has the ability to pay the down payments for the loan.
Based on these details, the bank will decide whether the applicant is eligible for the loan or not. It is at this stage that the bank will either approve your loan or reject it.
Along with the above mentioned details, the bank will also verify the following –
> Your previous residential address
> Your current residential address
> Contact number of your residential address
> Your employment company and its address
> The credentials and details of your employer
> Contact number of your employer or workplace.
The representative from the bank will visit the workplace and residence of the applicant. The representative will verify all the details that are mentioned in the application for. Also, at times, the references that are mentioned in the application for by the applicant is checked and verified by the representative. This gives the banker a clear level of trust and this is very beneficial for the approval of the loan application.
Also read the tips to choose a real estaste agent
Here it must also be mentioned that if the details that are provided by the applicant in the application process, are not true and it is proven during the verification process, this can lead to some serious legal troubles. This is because misinformation given to the banks is considered to be misleading. The home loan verification process is therefore very crucial.
Step 4
Approval or Sanction of the Home Loan Process
This is the most important step of the entire home loan process in India. It is at this stage that the applicant will get to know whether the bank has approved the loan or rejected it. The decision is taken entirely by the bank. If all the details that are provided in the application form are true and if they have satisfied the bank, they will approve the loan. Any dissatisfaction gives the bank the liberty to reject the loan application.
The factors that affect the decision include –
> Your monthly or yearly income
> The type of employment, whether you have a permanent job or a temporary one
> How long you have been doing the job
> Your current employer
> The type of work or business you do, if you are self-employed.
All these factors decide whether the applicant will be able to repay the entire loan amount with the interest rate that is set by the bank.
The bank will come to a settlement and discussion with the applicant and then, upon the final decisions, the bank will disburse a final home loan sanction letter to the applicant. In most cases, the home loan application is unconditional. But in few cases, the bank asks the applicant to take a few policies with the bank. This is only to increase the trustworthiness for the applicant.
Step 5
Processing of the Offer Letter
Once there has been a settlement between the bank and the applicant and the bank has made a decision of approving the home loan, it will send an official or formal letter of sanction. The letter will contain a number of details regarding the loan. These are –
> The amount of home loan is sanctioned by the bank
> The tenure of the loan or the loan period
> The interest rate that the applicant has to pay
> If the interest rate is fixed or flexible
> Loan repayment mode, whether it can be prepaid before the tenure ends or not
> Terms and conditions and the policies associated with the home loan.
After the applicant receives this loan sanction letter, it is important that he/she signs a copy of the letter and send it back to the bank. This copy will be kept with the bank for their records. However, here it must be mentioned that the applicant must read all the details, terms and conditions associated with the home loan before signing the letter or the documents. The most important thing about this is the interest rate and the tenure for the loan.
Also, the applicant always can negotiate with the bank regarding the interest rate. Often the banks listen to the applicants and in order to keep the customer, come to a settlement that is to the interest of both the parties.
Step 6
Property Verification and Mortgage Processing
As for any other loan system for home loan also, the financer would require a certain sort of security for the loan sanction. For home loan, it is mostly the papers of the home or property that the applicant intends to buy or buys. This is the reason, why home loans are also called mortgage loans. Thus check out this checklist before buying a flat in Kerala.
Once the loan has been sanctioned, the bank will check with all the papers of the property that the applicant has chosen to purchase. Even if the property is not finalized, the bank will give a deadline by which this task has to be done. All the original documents for the property need to be submitted to the bank and the bank will keep those documents as a mortgage security, until the entire loan amount has been paid.
Make sure all the necessary details are mentioned in the documents. These include –
> Name of the seller
> Address proof and other ID proofs of the seller
> Property name and address of the property that is being purchased
> No Objection Certificate from the legal owner or primary owner
> All the written documents from the seller, if he/she is not the legal owner of the property
> No Objection Certificate from the lessor, if the property is on lease already
> No Objection Certificate from the statutory development board representative & cooperative housing society.
The bank will then send all these papers to their lawyers and check if all the documents that are submitted are clear or if there is requirement for s..ome more documents.
Along with these, as a part of the home loan process in India, the bank representatives will also do a thorough property inspection to check for –
> Construction stage
> Progress speed for the construction completion
> Time taken to complete the construction
> Quality of construction
> Government certified approval papers for the construction to be held on that site by the constructor
Whether the layout is approved by the government or not.
If the property is already ready to purchase or is for resale, the bank will check –
> Age of the building
> Its maintenance
> Property value
> Existing mortgage or loan on that property, if any
> Construction quality
> Certification for handing over the possession
> Approval from the government regarding the building plan.
If all these are satisfactory, it is then ready for the loan disbursal.
Step 7
Disbursal of the Home Loan
Now that everything is satisfactory, the bank’s lawyer will make the required papers associated with the loan disbursal and the loan amount will be handed over to the party through check and the property papers will be handed over to the bank for the period of until loan repayment.
This complete home loan process will help you to apply for your loan if you are planning to buy a property in India.
Hi-Life Builders from Thrissur are one of the most prominent home builders, who have completed and successfully delivered 18 apartment projects in Thrissur, thus becoming the best builders that provides the top apartments and flats in Thrissur. Apart from building wonderful homes, we are also providing home care, resale and home loan assistance and you will be happy to know that we have a dedicated team for after sales service and property management service. Contact us and enjoy your relationship with your dream home builder.