The process of getting a loan may be overwhelming. With multiple options and a lengthy process, it can seem like a daunting task for new home buyers who are on a mission to buy their first home.
Let’s take a comprehensive look at the process of getting a housing loan.
What is a Housing Loan?
A housing loan or home loan is a credit instrument offered by banks and other financial establishments to help buyers secure funds to fulfill their housing needs. These could be buying or constructing a new house or renovating your existing home.
Below, we have a step-by-step guide for applying for a housing loan in India:
1. Fill Out the Loan Application Form and Submit the Documents
The first step is to fill out the loan application form. You need to fill in the required basic details like personal information, employment, income details, and details about the property.
Along with the application, you also have to submit the required supporting documents like the address, identity and income proof, bank statements, property documents, etc.
2. Pay the Processing Fee
Once you apply for the loan, you need to pay the loan processing fee. The processing fee varies from one lender to another. It ranges from 0.25% to 2% of the loan amount and is not refundable.
Some banks may not charge any processing fee; however, it is best to read the fine print and understand the applicable charges when you apply for a loan.
3. Discussion with the Lender
After you submit your application and processing fee, the next step is a discussion with the lender. In this step, you comprehend the finer details of the loan.
You must discuss the housing loan EMI, loan tenure, repayment terms, other charges, insurance details, etc., with the lender. Understand all the loan details in depth and clarify any doubts you may have.
4. Scrutiny of Your Loan Application
The bank decides if you are eligible for the loan and the amount you have applied for. You have to meet the bank representatives in person; the lender verifies the documents that you have submitted.
The bank will also verify your employment details by visiting your workplace or calling your office.
5. Assessing Your Repayment Capacity
You have to repay the borrowed amount in regular installments. The bank will assess your repayment capacity to ascertain if you can repay your housing loan EMIs regularly.
They will look at your income details and other running loans. Your bank statements, salary slips of Profit and Loss Statements in case of self-employed individuals help banks assess your repayment capacity.
6. Loan Sanction Process
After you complete the above steps, the lender decides to sanction a loan or not. If your loan application is approved, you receive a sanction letter. The sanction letter may be conditional, and they may grant a loan if you fulfill certain conditions.
7. Receiving the Offer Letter
After the sanction, the lender sends you a loan offer letter. The offer letter has details like the total loan amount, the interest rate and the types (floating or flexible), loan term, repayment terms, and other conditions (if any ) regarding the loan.
Accept the loan offer after you understand all the terms and conditions clearly.
8. Legal Verification And Property Check
The bank needs to ensure the legality of the property before they disburse the loan. You will have to give details about the seller, the seller’s identity proof, the property’s address, and the relevant No Objection Certificates (NOCs). These documents establish the property’s ownership and ensure that there are no disputes regarding it.
The lender also conducts a technical check and site estimation to assess the accurate value.
9. Signing the Agreement and Loan Disbursal
This is the final step where you sign the loan agreement that states all terms and conditions of the loan. The legal team of the lender conducts this process.
After signing the agreement, you either submit post-dated cheques or sign a debit mandate to pay the EMIs. The loan amount is disbursed to you. The bank keeps the original documents in its custody for housing loans in India till the entire loan amount is repaid.
Conclusion
Applying for a home loan is a big step in anyone’s life. Make sure to research the loan process and various lenders well before you apply. Follow the comprehensive steps discussed above and start your home-buying journey today!
