Purchasing your dream house is exciting, and the procedure to do so is straightforward these days if your documents are in order. Each lender has a few differences between what they offer such as interest rates, the tenor of the loan, and monthly installments. This article will help you with the procedure to apply for a house loan in India.
- Looking for a Lender
There are multiple lenders available, such as banks and HFCs, that offer home loans these days at competitive interest rates. Compare multiple lenders before choosing one to ensure you get the best deal possible, with the most competitive terms. The easiest way to do this is to review each lender’s offerings and compare, which you can easily do by visiting the lender’s official website.
Application Form for House Loan
Once you have established which lender you are going forward with, you can visit the application form on the lender’s website. Proceed to fill this application form with the relevant details. The form typically consists of general information such as:
- Personal details such as full name, contact details etc.
- Address details of the applicant
- Yearly or Monthly income of the applicant
- Employment details
- Education Details
- Property details for which the loan is being applied for
- Cost of the property
- Specifics of the property
- Means of financing the property
Document Submission
After filling in the following the details and submitting the form, you will need to share the following documents:
- Aadhaar Card, Pan Card, Passport, Ration Card etc.
- Property Tax receipt, Electricity Bill
- Birth Certificate, Government ID proof
- Employment Letter
- Salary Slip/P&L statements
- Bank Statement
- Income Tax Returns
- Details of the property
Document Verification
The lender verifies the authenticity of the documents to ensure that all the documents that you have submitted are legitimate and not fake. This is done to safeguard the bank’s interest. Any fraudulent activity or fake documentation will lead to immediate rejection by the bank.
It is in your best interest to provide genuine documents and verify the documents that you will be submitting to the bank. The following details are verified by the bank personally. They even visit the residence and place of work in-person to verify the details.
- Address Proof
- Place of Employment
- Employer Details
- Contact Details
Approval Process
The approval process is the most strenuous process when apply for home loan as it relies solely upon the lender to either approve or reject your loan application. If the lender is not satisfied with the documents and details you have submitted, they will reject your application or if your documents and details are in order your loan will be approved immediately.
Here are some of the document criteria that the banks take into consideration at the time of approval:
- Age, Work Experience
- Qualification, Degrees
- Monthly and Annual income
- Job-status
- Transactions made from the applicant’s bank accounts
- Ability to repay as per the interest rate based on the banking information
Offer Letter
Once the home loan amount has been sanctioned, an offer letter is sent to the applicant with the following details:
- Sanctioned loan amount
- Sanctioned interest rate on the principal loan amount
- Type of interest rate offered: Fixed interest rate or floating interest rate
- Tenor of the loan
- Mode of repayment
- Terms and conditions of the loan
The applicant needs to review these details given by the bank in the offer letter and they need to send a signed copy of the acceptance letter to the bank. It is in your best interest to read the terms and conditions carefully along with the other details, such as the interest rate, before sending the signed acceptance letter back to the bank.
Legal Verification
Upon approving the loan and finishing the documentation process of the home loan, the lender will conduct a thorough inspection of the property to be purchased. The applicant must submit the following documents:
- Name of the seller, builder, or developer
- Identification proof of the seller
- Address copy
- Property Address
- No Objections Certificate (NOC) for the property
- No Objections Certificate (NOC) from the cooperative housing society or the developer
- In the case of a leased land then a No Objections Certificate (NOC) from the lessor is required as well
A legal check is conducted for all the documents submitted and the same need to be authenticated as well.
Technical Verification and Site Visit
The bank then proceeds to conduct a site visit to ensure that the property is built by the industry standards and guidelines. An expert is sent for this purpose. The following details are verified during the site visit:
- Stage of Construction
- Quality of Construction
- Progression for the work
- Layout and blueprints for the property
- Certification for the land the property is being built on
- Duration of the construction
In case the property being purchased is already built or is up for resale the following details are verified:
- Age of the property
- Condition of property (Internal and external)
- Locality Area
- Existing mortgage loans on the property
- Property Valuation
- Building plans, blueprints etc.
Loan Agreement
Once all the property documents, seller’s documents, and borrower’s documents are in order, a loan agreement is drafted between the banker and borrower. The same needs to be signed and post-dated cheques for the next 36 months need to be issued to the bank.
Under the agreement, the property papers remain with the bank for the duration of the loan and once the home loan is repaid in full the property title is transferred back to the owner’s name.
Loan Disbursal
Once all the legal technicalities are out of the way, the bank proceeds to issue a cheque in the name of the seller or developer.
Processing Fee
During disbursal, you will need to pay a processing fee, which is often deducted from your final sanction.
This fee ranges from 0.25% to 7% of the loan amount. The fee is a charge levied by lenders to process your application and extend funds.
