Over the past 10 years, home loan processes have become less difficult and more time-saving. All thanks to online processes. Home loan is basically a secured loan taken against property security whether commercial or residential, which is funded by a bank loan. In short, if the borrower fails to pay back the loan, the banker can reclaim the borrowed money by selling the property. It is also possible that some lenders may offer you freebies and entice you to take home loans from them. However, you should be aware of that strategy of theirs.
So, here is step by step procedure that will help you go through the entire process of home loan.
Start with the comparison of home loan interest rates online. BankBazaar is a good resource to compare home loan interest rates of home loans.
You should go with the lowest home loan interest rates.
Step 1: Loan Application form and documents
Once, you have preferred the bank offering the lowest home loan interest rate; Submit home loan application to the bank. Loan application requires basic information of the applicant. Once the official application is filled, the next step is to tie all the valid documents required by the bank. For this you will have to submit processing fees and mandatory documents such as address proof, identity proof, edge proof, income details, bank statements, etc.
There are three important reasons the bank asks the applicant for all the above evidence:
- To authenticate the applicant.
- To obtain valid clues on the financial condition of the applicant.
- To check whether the applicant is eligible and has enough income to pay back the loan.
Step 2: Processing fees and application evaluation
Once the formal application and document acceptance course is done, the applicant will have to pay the processing fee to the bank.
The processing fee of the bank usually varies from 0.25% to 0.50% of the requested loan amount.
After submitting your application, processing fees and required documents, the bank will evaluate your application and call you for discussion in the bank. This is an unpaginated amount for maintenance of the applicant’s loan account.
It includes sending some personal paperwork (such as IT certificate, post-one-and-a-half cheque, etc.) every year.
Note: You should carry all the original documents for confirmation if necessary.
Step 3: Investigation of the documents
After evaluating your home loan application, the bank will verify your residence and office addresses and validate all documents submitted by you.
Millions of people apply for home loans DAILY. The applicant must be authentic through the whole process.
Any forged document or deceitful activity is objectionable by the bank. It is a dishonest crime and can lead to bigger troubles.
Step 4: The Approval process
Approval or approval part is one of the most important stages of the home loan process.
After the exam, the bank will make a credit valuation to check your credit history and establish your repayment capacity based on your income, age, qualifications, experience, nature of business etc.
A bank typically rechecks the applicant’s following documents to sanction a home loan:
- Qualifications, age, and experience details.
- Transactions made from the applicant’s bank.
- Monthly and annual income.
- The current employer and type of job he pursues.
- Nature of business (applicable only for self-employment).
- Ability to repay loan amount with fixed rate of interest.
If you satisfy all guidelines of the Bank, the bank will sanction your loan.
Step 5: Offer letter
Once the loan is certified, you will receive a home loan offer letter from the bank.
Although this letter is not a final loan agreement but an in-principle approval from the bank.
The following details are mentioned in this letter:
- Sanctioned loan amount.
- Rate of interest on total loan amount.
- Whether the Home loan interest rate ID is fixed or variable.
- Loan tenure.
- A mode of payment.
- Other terms, conditions and policies.
Once the applicant accepts the offer letter, he has to sign a duplicate copy of the offer letter.
Step 6: Legal check of property papers
Once you have agreed to the loan offer, you will have to submit all officially authorized documents related to the title of the property and other property documents to the bank for verification.
Then, the bank focuses on the property of the house for which it wants to pay.
Once the property is selected, the applicant will have to submit all the original property papers to the bank. The bank will retain all legal documents of the property till the full repayment of the loan.
Moreover, it acts as a safeguard towards a home loan applied by the applicant.
Step 7: Title inspection and legal check
Every bank is highly vigilant with lending loans and home assets that it is planning to finance. Once the property papers are submitted, the bank validates them for certification. A double check is therefore important.
Generally, under-construction properties are pre-approved by banks.
In case of ready to move in property, the bank representative will visit the site and make an independent assessment of the property.
Step 8: The site estimation
After full examination, bank representatives will visit the site and make an independent assessment of the property.
This is important because of the increasing incest. There have been a number of cases where applicants have shown property purchases at extremely exaggerated rates from the concerned institutions to get cheap loans.
Thus, the risk for a bank to lend money to the applicant has become greater. However, a site estimate can help the bank determine the total loan amount so that the permit is straightforward.
Step 9: Home Loan Agreement
After completion of all the above paperwork, the applicant will be called to sign the final home loan agreement.
This phase is known as MO (Execution Memorandum) and there is a stamp duty based on the state applied by the applicant.
This fee is paid by the applicant.
Step 10: Loan disbursement and final sale deed registration
Once the applicant signs the papers and everything becomes legally clear, the loan amount is given through cheque.
However, earlier, the applicant will have to submit some necessary documents to the bank, as these will serve as their personal contribution to the property of the house.
- He has to submit a cheque for the initial 36 months. Cheque is always subject to seller or development/society, authority or builder.
- Thereafter, the original property papers will have to be handed over to the bank. After paying the loan amount in full, you can deposit your original cell deed from the bank.
For an under-construction property,
- The bank will distribute loan amounts as per construction linked payment plan.
- Once Sale Deed Registration is done, you will be given copy of Registered Sale Deed and original copy will be handed over to the Bank.
For a ready-to-move in property,
- The bank representative will submit the draft loan amount directly to the seller on the date of registration and collect the original document with him.
So, it was the whole process for a home loan.
I hope this will help you apply for a home loan.
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