The rate of application rejection of home loans in India is high even though it is the first choice of many with the help of which they want to realize their dream of having their own house. Thus, understanding the loan process and your liability is crucial.
Following steps are involved in the home loan process in India:
- Firstly you need to submit the home loan application along with documents like identity proof, address proof, income proof, bank statements, etc.
- In the next step, you have to make the payment of the processing fee. It is a non-refundable fee which is charged by the bank to process your application. It varies between 0.5 to 1 per cent for most banks.
- After that, your application will be scrutinized and verified against the eligibility factors set by the bank.
- Which will be followed by assessment of repayment capacity. You must be capable enough to repay the loan with interest-only then your application will move forward.
- If you are capable, then the bank will draft an offer letter for the loan along with details like loan amount, home loan interest rate and type, tenure of the loan, mode of repayment, etc.
- The bank will also conduct a legal check and technical valuation of the property.
- The last step is disbursal which will be done after you have submitted original property documents and signed the loan agreement.
In today’s time, more and more people are opting for home loans in India to buy their dream house. It has actually become the prime or leading source through which most of the residential real estate transactions. However, still, the rate of home loan application rejection is high as people are unaware of the eligibility of the banks regarding the home loan, nor are they well informed about the process of it. Also, to make sure that you do not find yourself in a situation where you are unable to repay the loan. Thus, it is imperative to be well aware of the eligibility of home loan and its procedure.
Here are the steps that are followed in the processing of home loan:
Step 1: To apply for the home loan in India, you need to fill the application form with a bank which requires your personal details. Along with it, the following documents would be required for such scheme.
- An Identity proof
- An address proof
- Bank statement
- PAN Card
- Income proof
- In case the property is finalized, the property documents would also be required.
Step 2: Processing Fee: The next important step is for you to pay the processing fee to the bank, which is non-refundable. Many banks charge around 0.5 to 1 percent of the loan amount. It is collected at the start of the process to help the bank cover various expenses that will be incurred to process the home loan application successfully. Nowadays, manier banks are also waiving off the processing fee to attract borrowers.
Step 3: Scrutiny and Verification of Application: After receiving the processing fee, banks move on to evaluate your case and assess your eligibility on various factors. Bank’s officials would meet you to verify the information provided in the application form. The official can visit you at your residence or workplace wherever you may feel comfortable.
Step 4: Repayment Capacity: The next step is to evaluate the repayment capacity of the applicant. Your capacity of repayment can also prove to be a deciding factor in accepting or rejecting your loan. Sometimes banks also issue a conditional sanction in which case all stated conditions have to be satisfied for the disbursal to take place.
Step 5: Offer Letter: After the bank is satisfied with your repayment capacity, the bank will proceed with drafting an offer letter for the home loan, which will include:
- Interest Rate applicable
- The type of interest rate, whether it is fixed or floating
- The sanctioned amount
- Mode of repayment
- Tenure of the loan
- Any special scheme, if applicable.
- Other terms and conditions associated with the loan.
The letter has to be signed by you and submit an acceptance copy which is basically a duplicate copy of the offer letter with your signature on it. The bank requires the duplicate copy for records.
Step 6: Verification of Property: Before disbursing the loan original documents related to property have to be submitted with the bank. The bank will also conduct a legal check and technical valuation. You receive the original property documents only after complete repayment of the loan.
Step 7: Disbursal: After all the previous steps are properly completed, the registration process of the property starts, which is followed by loan agreement. The disbursal is done after you sign the loan agreement.
If you are applying for the home loan, then understanding the process of home loan in India and your liabilities are of paramount importance.