The home loan process simplified
Getting a home loan sanctioned can be a heck of a process. It is so, because of the copious procedures associated with it. Many people suffer a great deal while applying for a home loan because of their inadequate knowledge about the process, some even end up getting exploited by fraudsters. Well, we’ve got you covered with our simplified 11-step Proven Process. You will leave this page with everything you need to know about getting a home loan.
Determine your requirements
Step one is to define your requirements. Here you have to decide the type of house you will build. The desired type of house determines the amount required. Start by accessing your and your family’s requirements, considering your property type, lifestyle, and budget. Here you have to make up your mind with the total loan amount you are going to lend from the bank. You can make use of free online home loan calculator services.
The Home loan EMI calculator will help you estimate the loan amount based on your financial profile.
Check loan eligibility
Checking loan availability is the most crucial step in the loaning process. It encompasses eligibility criteria and lending options. Your eligibility will be based on your credit score, income stability, and existing debts. It is advised to contact both financial institutions and alternative lenders to compare and arrive at the best amount.
Being well-informed about the loan process not only helps get things done quickly but also helps you in terms of negotiating.
Property valuation and processing fees
Property valuation or property appraisal refers to the process of determining the value of the property you are going to buy and the loan amount. The purpose of property valuation is as follows:
- To determine the loan eligibility – Banks usually offer 80% of the property value as the loan amount. This process will eliminate misunderstandings between you and the financial institution.
- To reduce risk for the bank – Ensuring the correct property value helps eliminate risks for the bank.
- To ensure transparency – Property valuation serves as a window by providing the property’s true value serving both parties.
The processing fee is the standard charge levied by the financial institution or the lender to initiate the loaning process. The processing fee covers reviewing the documents, verifying them, and evaluating loan eligibility. Lenders charge 0.23% to 1% of the loan amount as processing fee. Whereas, some lenders fix a certain amount as a processing fee. During festive times, some lenders will waive the processing fee. The processing fee covers the following:
- Document verification – Lenders verify the required documents such as income proof, property papers, and bank statements to ensure all the documents produced are true and not manipulated.
- Creditworthiness assessment – Your credit score has to be assessed to reduce the risk factors and determine your loan eligibility.
- Legal due diligence – Lenders run a check on the property to ensure the right ownership.
- Loan processing and approval – File management, loan documentation, and communication are done in this process.
Legal documentation and property verification
Lenders run various checks on your documents to proceed with the sanctioning of the loan amount to ensure security and legality. The legal documents to be verified during the process are as follows:
- Chain of title document – Unbroken ownership of the property is verified to ensure the borrower is the rightful owner
- Sales agreement – The sales agreement provides the purchasing details of the document such as the property rate, date of purchase, and payment schedule.
- No Objection Certificates (NOCs) – NOCs mean that the amount is paid in full, there are no outstanding dues, and there are no disputes regarding the property.
- Occupancy Certificate (OC) – OC signifies that the property complies with all the building regulations and is constructed as per approved plans.
- Encumbrance certificate – This certificate signifies that the property does not have any legal complications such as mortgage and liens.
Property verification comprises the following steps:
- Physical verification – An authorized person will physically inspect the property to assess its condition, age, and adherence to building codes.
- Land record verification – This process refers to inspecting the previous ownership of the property to ensure rightful ownership.
- Title search – This process makes sure that there is no hidden charge or encumbrance on the property title.
- Tax clearance certificate – This certificate states that the property has no tax dues and all the taxes are up-to-date.
Discuss with various banks
Shopping around for various banks is a crucial step in getting a home loan. Discussing with various opens up a lot of options in front of you to choose the best one out of them. The terms and conditions such as interest rates, loan terms, and fees may vary from lender to lender. You can have a clear idea of the process and pick accordingly. Referring to multiple lenders provides the following benefits:
- Competitive rates – The rates may vary from lender to lender. By comparing the rates you can arrive at the best rate, saving thousands of money.
- Flexible options – Different banks provide various options for first-time homebuyers such as longer tenures for lower EMI.
- Opens window for negotiating – Enquiring various banks helps you with information to negotiate with the preferred bank.
Choose a suitable scheme for your loan
Choosing the right scheme is the most crucial process. It is necessary to analyze all the schemes from various banks to arrive at the most feasible option. Measures such as evaluating the financial situation, seeking expert advice, reading the terms carefully, and comparing and contrasting can be done to pick the right scheme for your home loan. Here are some factors to consider while choosing your scheme:
- Interest rates – The home loan interest rate plays a vital role in saving a lot of money. You can choose between fixed, floating, and hybrid interest rates. Each serves different benefits.
- Loan tenures – The Longer the tenure, the lower the monthly payments; the higher will be the overall interest rate.
- Prepayment option – This option allows you to pre-pay a certain amount of the loan, saving money on interest.
- Processing fee – As discussed earlier, processing fee differs from bank to bank, compare and choose the right one.
- Offers – Some banks provide special offers during festive seasons. Be informed of that and avail it to save thousands of money.
Know your monthly principal and interest payments
Knowing your monthly principal and interest payment is significant in financial planning. The principal amount is the amount you borrowed from the bank or the lender. Interest is the amount you pay the bank or the lender in return for lending you the money. Various banks have different interest rates.
You can envision your interest amount with the help of EMI calculators available online. This will help you plan accordingly.
Processing your KYC documents and pay slips
KYC expands to ‘Know Your Client’. Banks process KYC to ascertain the genuineness of the client. Your address proof and identity will scrutinized in this process for them to proceed to the next step.
Where KYC verifies your identity and address, pay slips are verified to know your bank transactions and determine the amount you can borrow.
Final loan approval process
Now that you are here, it means you have met all the criteria put forth by the banker. This is the most significant step, where you have to be financially stable and be constantly in touch with the banker to communicate regarding the process.
Having verified all the documents and completed the loan application, the banker will provide the sanction letter. The sanction letter will have the following:
- Loan amount
- Interest rate and type
- Loan tenure
- Monthly EMI amount
- Repayment schedule
- Prepayment process and association fees
- Disbursement process
- Loan officer’s contact info.
This is the final process where all your wait ends. Following the sanction letter, the bank will disburse the loan amount. Depending on agreed terms the amount will be released either in lump sum amount or in pieces. Communicating with the banker and providing all the necessary documents will help disburse the loan amount quickly.
That’s a wrap!
All these processes can be intimidating and time-consuming, but in the end, it is to eliminate all the possible discrepancies that may arise. Once you are done with the process you can set back and build your dream house with no questions asked. Spending time and money on the home loan process is never an expense but an investment for a hassle-free future.