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A guide to home loan procedure

Housing Loan is very helpful for home buyers in present time, when property prices are growing rapidly. Though home loans make home buying easy, the lengthy process involved in this make it a daunting task. Knowing the process in advance make it a bit easy for the applicants. Here is a stepwise home loan procedure guide.

 

1. Application form Submission

 

As there are several options from where you can get home loan such as private and public sector banks, Non-banking Financial Companies (NBFC) and Housing Finance Companies (HFC), the first step is to choose the right option and submit an application form. Along with the application form, the applicant also needs to submit some documents and pay some processing fee. This varies from one bank to another. Usually banks charge between 25 to 50% of the loan amount as a processing fees.

 

The documents you need to attach with the application form include:

 

  • Income Proof
  • Age Proof
  • Address Proof
  • Identification Proof
  • Employment Details
  • Bank Statements

 

 

2. Personal Meeting

 

Successful completion of application submission is followed by a personal meeting with the bank officials. Housing Finance Company evaluates your housing loan application and call you for personal discussion to collect more details which may have not been covered in the application form. Though nowadays this step is not followed by all the banks, you should be prepared for that. There is one tip for you, carry all your original documents with you while going for personal meeting.

 

3. Document Validation By Bank

 

Number of people applying for home loans in India is growing everyday, which has increased risk for banks. To ensure the veracity of the details provided by you, banks validate your credentials. They check each and every detail even the references you provide. Officials are sent to your current residence and office. It might sound irritating, but authentication of your credentials establishes trust between you and the HFC.

 

4. Credit Assessment- Most Crucial Step

 

This is one of the most crucial steps in housing loan process. Minor mismatch in document validation step can even get your application rejected. Once you the bank authorities are convinced about your credentials, you loan is sanctioned. Based on different factors including your age, income, experience, qualification, employment etc., your credit worthiness is assessed and financial institution figures out the maximum loan limit for you. Once your loan eligibility is decided, the same is communicated to you. Bank or the financial institution issues a sanction letter with some terms and conditions which you need to meet with before loan disbursement.

 

5. Detailed Offer Letter

 

After the home loan is sanctioned, you will get an offer letter from financial institution with the below mentioned details:

 

  • Total loan amount
  • Rate of Interest (ROI)
  • Type of interest rate – Fixed or variable
  • Loan period
  • Loan repayment mode
  • General terms & conditions of loan
  • Special conditions
  • Details of scheme, if the loan comes under any scheme

 

After you go through the offer letter you need to accept it and send a duplicate copy to bank with your acceptance. Its your responsibility to read between the lines to avoid any kind of misunderstanding.

 

6. Legal document submission

 

Once you select the property, you will have to transfer all the original property documents to the bank. The bank keeps the papers as security for the loan amount you get from the bank. Usually the papers include title documents of seller and a No-Objection-Certificate (NOC) by legal owners. Banks reserve their right on papers completely, until you repay the full loan amount.

 

In order to validate the credibility of your documents banks conduct a legal check. For a rigorous scrutiny the documents are sent to lawyers. Thereafter, lawyers either give a clear chit or ask for more documentation.

 

Property documentation in India itself is a chaotic process. In order to avoid problems at the time of legal validation, it’s better to buy property from an acknowledged developer.

 

7. Property Assessment

 

Bank representatives exercise extreme caution as the loan transactions involve a surplus of money. They visit the property of interest to appraise it. The appraisal applies to both under-construction and ready-to-move-in properties. Site visit generally includes verification of the below mentioned facts:

 

Under-construction Properties

 

  • Construction quality
  • Progress of work
  • Stage of the construction is same as mentioned in the payment notice
  • Builder has acquired all the requisite certificates to begin construction

 

Ready-to-move-in Properties

 

  • Maintenance of property
  • Age of the building – this is done because tenure of loan is directly dependent on age of building.
  • Infrastructure and development of surrounding areas
  • Builder has authority and certificates to transfer the ownership of the flat
  • Value of property in comparison of other properties in the area

 

Though this is a step involved in housing loan process, it is good for you as a buyer. Assessment of the property by experts ensures that you are buying a property that meets the requisite criteria. Banks generally charge some fees for this process which, can either be included in the upfront fee or bank might charge it separately too.

 

8. Property Documents Registration


Once the legal and technical appraisal is done, the lawyer clears the draft documents. After that next step is stamping and registration of the documents


9. Agreement Signing


Once all the valuation is done and documents are registered you need to sign home loan agreement with post-dated cheques for first 36 months. At this step only original property papers are also submitted with the bank.


From some banks you might also get documents with record of property documents transfer. Substantial stamp duty is payable on this, which varies according to the loan amount. No doubt bank will recover this from you only.


10. Loan Disbursement


After bank or the housing finance company is satisfied with all the assessment, property is legally and technically clear, the time for payment comes. You will be given the payment cheque. As usually 80-90% of the total amount is funded by bank, you need to submit documents proving that you have paid the remaining amount of the property. You have to provide the details with supporting evidences proving whether you have made payment personally or you arranged money from other sources. The cheque is made in the name of the third party such as the reseller, developer or the development authority.


Based on the type of property you are buying, loans are disbursed. For ready-to-move-in or resale property full and final loan amount is paid in one go. And in case of under-construction property, part-disbursement procedure is opted. In part-disbursement method loan amount is disbursed on the basis of the construction stage.


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