Many of you will surely agree on the fact that in today's life with rise in prices of every single essential thing, dreaming of a beautiful house has also become quite tough. Yes, you might be aware of the fact that these days buying or owning a home has become an important matter of thorough research. In addition to this, managing the finance is also a big challenge.
But, there is only one thing that is certain for sure and i.e., if you are ready to buy your dream home, there is no one you can stop you to fulfill this dream. Yes, with the presence of many flexible and unmatched home loan services, it comes quite easy and convenient for all to own their dream properties in their favorite location.
Moreover, when it comes to buying a home, location is one such factor that plays a pivotal role. The selection of the location should be done carefully, so that you won't regret in future. So, while you are busy in hunting the perfect location for your future home, it is really very important to keep yourself updated with the home loan process. Right from approval to disbursal, you should be familiar with each and every phase.
Read this article further to know how the entire home loan process takes place.
Home Loan Process
Before applying for a home loan in one particular bank, it is important to compare the interest rates and loan benefits offered by almost all banks or financial institutes. Once you start comparing the rates, try to analyze the best deal being offered to you by different banks, and choose the one carefully. After doing that, the process of home loan starts once you fill in the application form.
Filling and Filing of Application Form
The first and foremost thing that you need to do is to filling up and submitting the home loan application form. You may find the difference in the format of the form as it varies from bank to bank, but almost 80 percent information they want from you remains the same in all the banks. Moreover, an application basically asks your personal & professional information, your property details ( if finalized), the estimated cost and last, but not the least your liability and assets details.
Once you are done with the application form, all you need to do is just submit your few documents, which are:
Income proof,Address proof, Age proof, Identity proof, Proof of educational qualifications, Employment details, Bank statements, Details about the property ( if finalized)
If you submit your home loan application form, you need to pay the processing fee as well. The charges usually depend upon bank to bank. Generally, the fee structure ranges between 0.25-0.50% of the total amount of the loan. Once you negotiate the processing fee, this thing will end up with the reduced processing fee rate by the bank. The main purpose behind charging this fee is to offer various services to the customers such as-sending Income Tax certificates on a yearly basis, maintaining post dated cheques and so on.
Evaluation of Application and Personal Discussion
Once you are done with filling out the application form, the banks or institutes properly analyze your home loan application, and then decided to have a personal meeting with you. Usually the evaluation process of the application takes approx 2 or 3 days. After this, you are supposed to come up with your original documents that you have submitted, when bank calls you for the discussion in person. It is quite important for you to provide the exact financial details because until and unless the bank is not satisfied with the credentials provided by you, your loan will not be sanctioned.
Investigations by Banks
Banks cross-check every single information provided by you by sending their executives on your official as well as residential address. The actual purpose of visiting your residence and workplace is to verify your address details and credential of your employer. Even in some cases, the telephone lines of your home as well as work are also verified by the banks. It would be great, if you will make yourself available during the verification process taking place at your home or place of work so that you can share all required the details with them.
Sanction of Loan and Credit Appraisal
Once the bank is fully sure about your credentials, and also the validation process, it is surely a green signal for you, and the loan amount is now ready to be sanctioned on your name. However, there might be a chance that your loan application gets rejected. Actually banks calculates your credit worthiness on the basis of your income, age, employer, etc. In case you are self-employed, your credit worthiness is calculated on the basis of your work nature, CIBIL report, bank statements and many more. Hence, after doing all this, the bank decides the loan amount that they can offer to you. You will then receive the sanction letter from the bank in which no terms and conditions are mentioned or it can also put forth the certain terms and conditions that that you need to fulfill, just before your loan gets disbursed.
Loan Offer Letter
Once everything gets approved, you will receive the loan offer letter which usually contains following-
- Rate of Interest
- Tenure of the Loan
- Mode of Repayment
- Nature of rate of interest that is whether fixed or variable rate of interest linked to a reference rate
- Loan Amount
- Terms and Conditions of the Loan
After you are satisfied with the above details and signed the acceptance copy, the bank will keep the record of this. However, the good news is that you can also negotiate with the bank regarding the interest rate because of due to the strong competition going in the market, the banks usually get ready to offer you low interest rates so as to meet their targets and defeat their competitors.
Property and Paper Work
Now the real game or you can say the legal side of the bank comes into play. After you are done with the selection process of your property, the banks ask you to submit over all the original documents of your property. These original documents of yours are now the part of the bank's custody and serve the purpose of security till the time you repay all your loan amount. As far as property documents are concerned, they generally consist of following things-
- The NOC, i.e. No Objection Certificates from the legal owners of the property such as statutory development authorities, housing societies, in case of leasehold then the lessor of the land, etc. However, the purpose of NOC does not serve in case when the property is nestled on freehold land.
- The documents on the name of your property seller
- You need to be extra careful because the documents provided by you to the bank will go through the scrutiny that would be conducted by the bank's lawyer himself. This legal check is performed so as to verify the validity and authenticity of all the relevant documents provided by you to the bank.
Validation and Valuation of Property
Before proceeding ahead with your home loan, the banks personally visit the actual property site. To perform this task, the bank representative visits the property site and do all the valuation and validation checks. More to the point, this process of verification is usually performed to know the following things-
If the property is under construction
- To check the construction quality.
- To know the layout and area of the property, and make sure that whether the property lies in the permission granted governing authority or not?
- To ensure the construction has reached up to the same level as mentioned in the payment notice given to you by the builder.
- To know whether the construction work is satisfactory or not?
- To properly analyze the property as compared to other deals in the nearby locations.
- To make sure that the builder has the requisite certificate so as to begin the construction.
If the property is ready for sale/resale
- To know the actual age of the property.
- Checks the quality of the construction
- Development of the nearby places.
- To keep an eye on the internal and external maintenance of the property
- To ensure whether the property can last the loan tenure. The tenure of the loan is restricted to the maximum property age, decided by the bank, hence your eligibility will bear its impact.
- To ensure whether there is existing mortgage running on the property or not?
- To make sure that the builder has received requisite certificates to hand over the possession.
- Evaluation of the property in accordance with other deals running in nearby areas.
Thus, it would not be wrong to say that when it comes to home loan, the valuation and validation of the property play a crucial role in checks and scrutinies, being made by the banks in the involved substantial amount. However, there are few banks, who prefer to do the validation and valuation of the property just before the sanction because this thing will actually help you in saving a lucrative deal. Not only this, it would also help you in saving the fee which you will pay to the bank so as to get the sanction.
Registration and Signing of Loan Agreement
Once everything has done and your property gets the nod from the bank, the phase i.e. stamping, registration and finally the signing of the home loan agreement is done. At this stage, you are requested to pay the post dated cheques, and also have to pay the stamp duty, if applicable in the bank.
Disbursement of Home Loan
After the proper execution of loan agreements, the disbursement of the home loan comes into the forefront. The banks only sanction approx 85-90% cost of the house, but is important to submit your documents, claiming that you have already given your contribution. Whenever you decide to get a property that is ready for sale or resale, the loan will be disbursed in full. While on the other hand, if you choose a property that is under construction, maybe the part disbursement of loan takes, depending upon bank to bank.