All of us dream of becoming homeowners. It is a way of ensuring lifelong financial security; the kind that does not come from living in a rented home. But buying a home is a complicated process. Whether it is years of savings to be given as down payment, or finding the right locality to invest in; the process of buying a home is elaborate. And since property investments take a huge chunk of savings, most of us rely on home loans. Yes, you can take out a home loan and pay it off in easy equated monthly instalments (EMIs) for tenures lasting up-to 30 years. Let’s understand the home loan procedure.
Step 1: Fill the application form
The process of taking a home loan begins with the borrower filling an application form. The application form is the most basic document in which you have to provide personal information about yourself like your name, address, phone number occupation, monthly and annual income and education details. You must also provide details about the property you wish to purchase, the estimated cost of that property and the down payment you can afford. Note that you have to furnish your ID proof, address proof, income certificates, ITR of the last three years, bank statements etc., with your application form.
Step 2: Verification of documents
After you submit your documents, the bank verifies the documents provided by you. This is an important aspect of the home loan process and banks may take up to 2 days to verify your documents. During this time, you may also be asked to visit the bank and appear for a face-to-face interview. This is the banks way of confirming that you are capable of repaying your loan within the stipulated tenure.
Step 3: Background check
Apart from verifying your documents, the bank also conducts an independent background check of the borrower’s credentials. To this effect, the bank may conduct an investigation basis the information supplied by you in the application form including your previous and current residential addresses, your place of employment, credentials of your employer, office contact details etc.
Step 4: Processing free payment
After the bank is convinced about your repayment capacity, it begins the housing loan process. As such, you must pay a processing fee which is an amount the bank collects to process your loan application. Banks typically charge anywhere between 0.25% and 0.50% of the principal loan amount +applicable GST as processing fees. The bank charges a processing fee because of the investigations conducted to check your eligibility and your Proposed Property’s Valuation and Search. This does not necessarily mean that your loan is approved
Step 5: The loan approval process
By far, the most crucial stage in the entire home loan process; the bank now decides whether to approve or reject your loan. To ensure that your loan is not rejected you must furnish all the listed documents truthfully. This is also the stage in which the borrower can find out the maximum loan amount as approved by the bank, as well as the interest rate charged according to various tenures. The bank communicates these details by sending you an official sanction letter confirming that your loan is approved.
Step 6: Processing the property documents
After you receive the official sanction letter approving your loan, you are required to submit the original property documents to the lending bank, which remain in the bank’s custody until the loan is repaid in full. The original property documents typically include the complete chain of ownership acquisition and transfers of ownership in sequence till your Sale Agreement execution, applicable NOCs from related authorities along with the seller’s name, ID and address proof, etc. The bank verifies the property documents before approving the loan. Bank also sends it’s representative twice to physically visit the property site, once before approval of loan and then after sanction of loan.
Step 7: Loan disbursal
The final step in the entire housing loan procedure is the loan disbursal stage. This includes the registration of the loan deal i.e. acceptance of Terms and conditions of Sanction by the borrower/s, the signing of the loan agreement/documents and the disbursement of loan as per terms stated in the Sale Agreement, including down-payment by the lender.