How to Apply for Home Loans in India
Each one of us dreams of becoming a home owner, sooner or later in life. We hope to fulfil this important life milestone by a certain age. But with escalating property rates, the only way in which one can become a home-owner is by taking on a home loan. As such, it is very important to understand this loan works. Here’s the home loan procedure.
Step 1 – Fill the application form
You need to provide a formal application for the home loan. You can do this by visiting the website of the lender and going to the loans section. Here, you must select the home loan section and fill the loan application form. The loan application form is a slightly long but general form in which you need to enter your basic details – name, address, contact number, educational qualification, employment status, income earned and so on. You must also mention the details of the property you intend to purchase; its location and market value along with the loan amount required and down payment you can provide.
Step 2 – Gather and submit the necessary documents
The next step in the home loan procedure is gathering all the documents mentioned in the loan application form and submitting the same. This is a very crucial step. Ensure you don’t miss any document since it can result in your loan getting rejected. While you have to provide some mandatory documents such as your PAN and Aadhaar Card along with another ID, age and address proof document, you must also provide your employment details and income proof documents, depending upon whether you are a salaried or self-employed individual. You must also submit filed IT returns of the last 3 years along with your educational qualification documents.
Step 3 – Pay your loan processing fee
After filling the application form and submitting the documents, you must pay your loan processing fees. The lender may levy a fixed loan processing fee or a percentage of the principal loan amount. Most lenders generally levy a loan processing fee of 0.25% to 1%, which is a non-refundable amount. Lenders levy this fee to maintain the loan account and also to conduct the mandatory background verification before your loan is approved.
Step 4 – Applicant scrutiny and verification
This step in the housing loan procedure is conducted by your lender. Your loan application is evaluated and the lender takes a call about sanctioning your loan. This decision is taken after considering several important factors including your net (take-home) monthly income, your credit scores, your profession, your employment status, your credit repayment capacity and so on. You may be asked to appear for a personal interview and the lender may even visit your office or home to verify the information provided by you in your loan application form. Once the verification is completed you will be informed about the loan amount you are eligible for.
Step 5 –The offer letter is drafted by the lender
Once the lender is convinced that you will be able to repay the loan in a timely manner; the bank drafts the offer letter. The offer letter is also known as the loan sanction letter in which you can find information regarding your eligibility – the maximum amount you are eligible for, the home loan interest rates and tenure. You can also find the terms and conditions of the lender in this letter. If you find them acceptable, you may sign the approval letter and submit it to your lender.
Step 6 – The lender verifies the property you wish to purchase
The procedure for home loan continues as the lender verifies the property you wish to purchase. The lender needs to check with the builder regarding the construction of the project, if there are any delays, the possession time (in case of under-construction properties) and so on. A representative of the bank or HFC will physically visit the site of the property to ensure there are no pending litigations or legal issues with regards to the property you wish to purchase.
Step 7 – The loan amount is disbursed
This is the final step in the home loan procedure. The lender starts the process of registering the loan, but you have to prepare the legal documents in accordance with the format provided by the lender’s lawyer. As the borrower, you have to pay the stamp duty charges and submit post-dated cheques. The lender will now disburse the loan amount in the builder’s account – partially or completely as per the loan terms.
As you can see, this is how home loan works. Most lenders today have streamlined the loan application procedure and you can apply for the loan, both by visiting the office of the lender as well as through their website, online.