- Failing to submit the required property documents can make lenders reject your home loan application
- Read here the property documents that you will need to submit when applying for a home loan
Home Loan applications are often rejected due to document insufficiency. Most just concentrate on the loan amount they are eligible for and the interest rate at which they will service the loan. They don’t emphasize much on the documentation part, which is a critical aspect of a home loan. As a borrower, you need to submit KYC and income proofs in a home loan like the way you do in other loans. But where most fumble is on the Property Documents required in a home loan. The list of property documents is quite long and important for a borrower to understand.
So, in this article, we will be covering all the property documents required for a home loan so that you can prepare accordingly and won’t face any difficulty in getting your loan sanctioned. Keep reading to know more!
List of Property Documents for Home Loans
There are several kinds of property documents required for a home loan, such as Sale Agreement, Encumbrance Certificate, Property Map, Allotment Letter from the Builder, NOC from Builder, MODT, Property Chain, Registration & Stamp Duty Receipt, etc. We are explaining each of them below so that you can understand the importance of these property documents. Check them out!
Also known as the Agreement for Sale, this is one of the most important property documents for a home loan. You must be thinking about what exactly the Sale Agreement is? Well, the Sale Agreement is a written agreement between a buyer and seller for the sale of the immovable property. This will consist of all the details (terms and conditions) related to the sale of property that will happen between the buyer and the seller in the future. A Sale Agreement does not give you any right or interest in the property. We are providing some of the details that the Sale Agreement consists of below. Have a look!
- The Parties in the Agreement
- Property Location and its detailed Description
- Further Payment Schedule (if any)
- Specifications of the property to be developed
- Timeline for the construction
- Penalty Clauses in case of default by any of the parties
- Witness Signatures from both the parties
Also known as the Final Deed or Conveyance Deed among the lenders, a Sale Deed is the biggest proof of property ownership. A lot of people confuse Sale Deed with the Agreement of Sale. A Sale Agreement is the promise of the transfer of the property while the Sale Deed happens when this promise becomes a reality. If you are looking for a home loan, you will need to submit your Sale Deed. Without having an original sale deed, it is almost impossible to purchase or sell any land or do any construction on it. After repaying the loan amount, the lender returns your Sale Deed.
Some of the important details that Sale Deed consists of are mentioned below. Check them out!
- Details of Both Parties (Buyers and Sellers), such as Name, Age, Addresses, etc.
- Detailed Description of the Property (Total Area, Surroundings, etc.)
- Sale amount including Advance Payment made by the buyer
- Mode of the Payment
- Time Frame within which the property title will be actually transferred to the buyer
- Actual Date of the Home Possession
- Full Authority of Buyer to Sell
Extracts or Khata Certificate
At the time when you are buying a new property with the help of a Home Loan, the lender checks if you have a registration on the new property. For this sole purpose, lenders use Khata Certificate or Extract which is considered to be an important property document for a home loan. This document gives you proof that the property for which you are taking a home loan is properly registered in the local municipal records and all the construction has been done by the approved construction plan. You will also require this document after repaying the home loan when you want to transfer the ownership of the property.
Memorandum for Deposit of Title Deed
When you are going for a home loan, Memorandum for Deposit of Title Deed (MODT) is the property document that you would need. Going by its long and complex looking name, you must be wondering what exactly MODT is. Well, this document is just an undertaking given by home loan borrowers that would state in writing that they have deposited the documents related to the property’s title with their respective lenders. It doesn’t matter which kind of home loan you are taking for, you will need to submit the MODT to your lender.
For home loans given by some lenders, borrowers also need to register this undertaking in addition to the loan agreement. You will need to pay some charges to register the property on your name. The Stamp Duty charges tend to change from one state to another state as per the guidelines. Generally, it is either 1% of the Market Value or the Agreement value of the Property of whichever is higher. So, it can be called as one of the hidden charges related to Home Loans. For some reason, if you will be unable to repay the home loan, lenders will use the MODT to recover the debt.
After repaying your home loan amount, the lender will cancel the MODT and will issue a ‘Deed of Receipt’. Before this, you will have to collect the No Objection Certificate (NOC) from the bank and check if it has your name, property details, loan account number, etc.
Copy of Property Map
When you opt for a home loan, you need to have the property map. This map of your property should be approved by the respective statutory body to be verified by the lender. It will approve the fact that the construction of the property is legal and has been completed according to the rules and regulations fixed by the statutory body.
Allotment letter from the Builder
You will require an Allotment Letter from the Builder or Housing Society when you are taking a home loan to buy a property. The Allotment letter can be taken from the builder or housing society from where you are purchasing the property. This allotment letter will contain information like the description of the property sold or bought between the buyer and seller. One of the most important things that this letter will contain is the information about the Down Payment money that you paid to the builder or housing society so that the remaining amount can be funded by the lender. Lenders provide the home loan amount based on this Allotment Letter.
You also need to remember that an allotment letter can only be issued to the first owner by the Builder or Housing Society. Subsequent owners (owners after the first one) can get a copy of the original letter from the previous owner. Even if you are not taking a home loan, you will need this document to purchase the home you want.
General Power of Attorney
This document, known as the Power of Attorney, is required to know whether the previous sale or purchase of the home – for which you want a loan amount – was done by an authorized person on the behalf of the buyer or seller. This document is a legal instrument through which one individual gives another individual the power to act on his or her behalf as the legal representative to make all the financial decisions regarding the property, including the sale and purchase on behalf of the buyer or seller. You will need this document in the original at the time of loan documentation.
Construction Agreement Between Builder and First Owner
This is also an important property document that is basically a work contract between the Builder, who is building your home, and the First Owner. It is a written agreement related to the execution of the construction work, which also includes the transfer of goods involved in the execution of the contract. So, when a builder completes your construction work, it will transfer all the items and goods involved in the work along with the completed work to the first owner. If you are opting for a home loan, you will need to present this document in the original to the lender for verification.
This is one of the most crucial property documents that you will need at the time of a home loan. If you are thinking about why you will need this particular property document, the answer is to prove to the lender that the said property does not have any pending due or mortgages. Without submitting the encumbrance certificate, the lender will not provide you the loan as the credit risk will be high for them in a property that still has dues on it. The encumbrance certificate will have all the details related to transactions made on the property from its date of registration until now.
The certificate can be issued in two different forms. The first one is Form 15. This form will be issued if the property has any registered encumbrance. Otherwise, form 16 will be issued which will clearly mention that there are “Nil” encumbrances on the property for which you want a home loan. The certificate will also confirm the fact that the property is still in the name of the person who is selling it.
At the time of getting a home loan, you will need to present the original copy of the Possession letter to the lender. This letter will indicate in writing that the possession of the property is being transferred to the purchaser on the date mentioned in the Possession letter. If the property is being purchased for the first time from a builder, this letter is mandatory to get a home loan.
When arranging the property documents for a home loan, you must remember to collect the Payment Receipts from the builder/developer if you are buying a new property. If you are not the first owner of the property and buying a resale property, you must ask for a copy of the original payment receipts issued by the builder to the first owner.
Latest Tax Receipts till the Date of Registration
Buying and selling a property can attract tax. That’s why you need to collect all the tax receipts from the previous owner so that you can know they have paid all the taxes on time and there is no due tax on the property you are purchasing. This property document also helps in verifying the legal status of the property, so it will be helpful for the lender and your loan application can be approved quickly.
Own Contribution Receipts along with the Bank Statement
As we said before that lenders provide 75% to 90% of the overall property value as the loan amount. You will have to fund the remaining amount known as Down Payment from your own sources. This usually ranges from 10% to 25% of the overall property value. So, a lender will need the OCR (Own Contribution Receipt) along with the Bank Statement to verify that you have paid your contribution in the form of down payment to the seller. After this, the lender will disburse your home loan amount.
NOC from the Builder or Housing Society
Known as the No Objection Certificate (NOC), you will need this document from your Builder or Housing Society from where you are purchasing the home. It will ensure that there is no further objection from the builder or apartment association regarding your home.
Occupancy Certificate is also one of the significant property documents for a Home Loan that will verify that the construction has been completed. After this, an inspection is done again to verify whether the construction has been done according to the approved plan or not. An occupancy certificate will ensure that the property is ready for possession. For the borrowers, who are purchasing the property as the first owner, this certificate is important to get a home loan.