Are you dreaming of buying your own home? Do you want to invest in a property? Does the lack of capital stop you from pursuing your dreams? Do not worry as you can always acquire a home loan to fulfill your dreams.
Not everyone is familiar with the process of procuring a home loan. Just because of this lack of awareness, many loan applications are getting rejected. It is vital for anyone to be well informed about bank’s procedures to avoid any confusion in the future.
Application for a home loan:
The process starts with a formal application to the concerned bank. You should provide some personal details, so that the bank can evaluate your eligibility for taking a loan. Some of the documents that they require are ID proof, address proof, proof of age, educational qualification proof, employment details, statement of the bank, proof of income, PAN card information and the details of the property.
Paying the loan processing fee:
Banks charge you with a loan processing fee that is non refundable. Most banks in our country charge 0.5% to 1.0% of the total loan amount as the fee. They use this amount for starting and maintaining the complete loan process. These days many banks are waiving these processing fees to bring in more borrowers. Little bit of negotiation with the bank officials can help you to avail this advantage.
Verification of the applicant:
After applying for the loan and paying the processing fee, the bank assesses your case and decides the principal amount that you are qualified for. At this stage of process, you should meet a bank official personally so that they can identify your repaying capacity. Then, they proceed to validate all the facts and credentials that you had given to them with your application. They also visit your work place and your residence for validation.
Assessment of the capacity to repay:
This is the most important part of the process for procuring home loan. The bank decides to sanction or deny your loan application depending on this factor. They should be satisfied that you would be able to repay the principal along with the interest on time.
Receiving an offer letter for the loan:
At this phase of the process, the bank sends you an offer letter with all the details that you need to know. The information includes the sanction amount, rate of interest, fixed/floating rate of interest, tenure of the loan, type of repayment, details about special scheme and terms & conditions related to the loan. After receiving this, you have to submit an acceptance copy to the bank with your attestation. The bank keeps this attested copy for its records. Few banks also levy administrative fees at this stage of the process.
Verification of the property:
Before disbursing the loan, the bank validates the concerned property. You have to submit the original copies of the no objection certificate, title deed and other related documents. A legal validation is done to determine that the title is clear without any disputes. In the technical valuation, the bank scrutinizes the location of the property, the stage of progress, quality of the construction and evaluates it based on those parameters. You have to understand that the home loan is a secured loan and the collateral is the property. The documents of the property would be returned to you only after you repay the entire loan amount. If you want to avail loan for buying a unit from one of the flats for sale in Pallavaram, the property should be clean without any disputes.
Disbursal of the loan:
After all the previously discussed formalities have been satisfied, the process of registration for the home loan begins. Legal documents are drawn in a format that is approved by the lawyer of the bank on stamp papers. After this, you have to provide post-dated cheques for the agreed term and then you have to sign the agreement of the home loan. Post signing, the disbursal process begins and depending on the kind of disbursal that is decided upon, the bank dispenses the loan amount.
Factors determining the borrowing capacity:
- Banks prefer borrowers who would be 58 years of age when he/she pays the last of the EMI. The tenure depends on the age. If you are close to 50 years in age, the bank would provide a repayment tenure option ranging from 6 to 8 years. If you are young and at mid thirties, you can extend the repayment tenure to 20 years.
- Banks do not consider allowances, benefits, bonuses and performance based pay as a part of your monthly salary. Borrower’s liabilities should not go over 55% to 60% of the monthly income they receive.
- Most of the banks take up to 40% of the monthly income for the payment of the EMI. Cash flow and other expenses are important and they are the primary criteria for identifying the eligibility of a person for a home loan.