A guide to Home loan process in India

30 Aug 2013

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Buying a home is an important and crucial decision making process. It is rare to find someone who would pay the entire amount of the home at one go, therefore a home loan is an essential element of any home buying process. Taking a home loan is a long journey, which involves many stages. The key to getting your home loan in a smooth way is being familiar with the entire home loan process.

  • Formal Application: This includes basic information about you – personal, residential, income, employment, educational details, property details, estimated costs and current means of financing the property. The application form must be supported with valid documents to substantiate the facts.

Generally the banks will ask you to submit following documents.

    • Income proof

    • Age proof

    • Identity proof

    • Address proof

    • Employment details

    • Proof of educational qualifications

    • Details about the property if finalized

    • Bank statements

The purpose of the entire exercise is to ascertain the suitability of an applicant for a home loan. The income documents and bank statements provide vital clues to the bank regarding your financial health.

  • Processing fees: Banks charge a processing fee for every home loan application. This fees is non refundable. The processing fees vary from one bank to another. This fees is used by the bank to start and maintain the home loan process including completing the various formalities during the entire period.

  • Evaluation & verification: After applying successfully for the home loan and submitting the processing fees, the bank evaluates your application, decides in principal about your home loan and requires a personal meeting with the bank officials. This decision for personal interaction can be taken within 2-3 days of submitting a complete application. The purpose of this personal interaction is to know more about the borrower and his repayment capacity.

  • Verification of repayment capacity: Once the field investigations over, the bank now goes ahead to verify your repayment capacity. This is the most vital part of any home loan process. If the bank finds that you'll not be able to repay the money back with interest on time, it will simply deny you any home loan offer. On the other hand if the bank finds that all's well and is convinced by your repayment capacity, it sanctions your home loan. 

  • Offer letter from home loan: The bank then prepares an offer letter which contains the following detail:

    • The amount of home loan sanctioned

    • The interest rate applicable on your home loan

    • Whether the interest rate is fixed or floating

    • Your home loan tenure

    • The mode of repayment of the home loan

    • If any special scheme applies to the home loan, its details

    • The terms and conditions associated with the home loan

    • If you find the offer attractive and agree with all the facts mentioned in the offer letter, you will have to provide an acceptance copy to the bank.

  • Verification of the property: Strange but true, even after all this long process; the home loan is still not yours. Now the bank will verify the property in question. The home loan is a secured loan with the property being used as the security or collateral. So, to get the home loan you must submit the original documents of the property to the bank. The title deeds, no-objection certificates and other documents required by the bank are to be submitted in original and the bank keeps them safely until you repay the entire loan amount. After taking the papers, bank conducts a legal check so as to verify that the property has a clear title and the home loan is being disbursed to the right person and for the right reasons. 

The disbursal of the home loan: Once the formalities are completed and the bank is satisfied with the legal, technical and financial valuation of the property, the registration process for the home loan begins. After the loan is disbursed the lender institution gives you some documents which you have to go and get it stamped from the registrar at the same place where you got your house purchase agreement registered. Only then does the bank give you further disbursement.