A home buyer’s complete guide to the home loan process in India

January 20, 2024 punepropertyexpert

Check your home loan eligibility

Prior to seeking a home loan, verify your eligibility for it. Financial institutions establish criteria to evaluate and ascertain the risk profile of potential borrowers. The eligibility for a home loan depends on factors such as income stability, credit score, age, existing financial commitments, property value, loan amount, tenure, and down payment capacity. Evaluating these factors helps lenders determine whether you qualify for a loan. Utilizing online calculators and seeking advice from financial advisors can assist in understanding and potentially improving your eligibility.

Choose your lender

The market is abundant with home loan lenders for you to select from. Nevertheless, not every lender will be inclined to provide you with the most favorable loan terms. Hence, conducting comprehensive research is essential. Engage with numerous lenders, assess the offerings from each, utilize a home loan EMI calculator to compare options, and ultimately opt for the lender presenting the most advantageous deal for you.

Home loan application and documents

Initiating the home loan process begins with completing the home loan application form. You’ll be required to provide personal and financial information to assist the lender in evaluating your loan eligibility. Additionally, you must attach supporting documents to substantiate the details provided on the form, including:

PAN card
Age proof
Address proof
Identity proof
Income proof
Bank statements
Proof of educational/professional qualifications
Employment details
Property details (if shortlisted)

Pay the home loan processing fee

Lenders typically impose a non-refundable loan processing fee, and the amount may vary from one bank to another, depending on the loan amount. This fee is applied to initiate and facilitate the home loan process smoothly. To economize, consider choosing a lender that levies a lower processing fee.

Wait to hear from your lender’s representative

Upon submission of comprehensive and accurate documentation, you can generally expect a response to your loan application within 24 to 72 hours. In most cases, lenders typically take around 48 hours to make a decision on a loan application.

Wait for document verification

Following the submission of the form and required documents, the appraisal process commences. The bank assesses your eligibility by scrutinizing specific information related to your income, liabilities, credit score, and other relevant factors.

For self-employed individuals, the evaluation process extends beyond the aforementioned criteria. In addition to personal financial details, we also assess the sustainability of your business and scrutinize the cash flow to make a comprehensive determination of eligibility.

Wait for your loan sanction/offer letter

Upon successful approval of your Home Loan application, the bank will issue a sanction letter. This document serves as evidence that the bank has granted approval for your loan. It includes crucial details about the loan transaction, such as:

The loan amount you are eligible for
Tenure of repayment
The interest rate offered
Whether the interest rate is fixed or floating
Terms and conditions of repayment

Your lender will now verify all the property documents

To facilitate a seamless legal and technical assessment of the property, it is recommended to submit all available documents at once. These documents encompass the entire chain of title documents (in the case of a resale property), the sale agreement with the builder, NOC (no-objection certificate), OC (occupancy certificate), and any other document that the bank may need for verification. Additionally, a technical inspection of the property will be conducted to ensure compliance with sanctioned plans and other applicable norms, as well as to assess the market value.

Sign the home loan agreement and wait for loan approval

If your lender is content with the information provided and has verified the property’s safety, they will present you with the final loan agreement. This step requires a visit to your lender’s nearest office for a physical signature, as it cannot be completed online. Home loan applicants should thoroughly read the entire agreement, ensuring a clear understanding of each point before signing. If any aspect raises concerns or remains unclear, seek clarification. If necessary, consider consulting a home loan legal expert, but refrain from signing the agreement until you fully comprehend all its terms and conditions.

Home Loan Disbursal

Lenders disburse the loan amount in a single instalment for ready-to-move-in properties. However, for home loans obtained for under-construction properties, disbursements are made in tranches or phases, depending on the progress of the property construction. During this interim period until the final disbursement, borrowers may be required to pay Pre-EMI interest. This involves monthly payments covering the interest cost accrued on the disbursed loan amount from the initial disbursement date until the commencement of regular EMIs.

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FAQs On Home Loan Procedure in India

What are the primary eligibility criteria for securing a Bank or HFC home loan?

The eligibility criteria typically involve factors such as age, income, job stability, credit score, and the assessed value of the property.

How is the determination of home loan interest rates carried out?

Home loan interest rates are influenced by factors such as market conditions, the applicant’s creditworthiness, and the loan amount. Fixed and floating interest rate options are commonly available.

Which documents are necessary for the bank or HFC home loan application process?

Documents usually include proof of identity, address, income, employment, property details, and financial statements.

Can I apply for a home loan jointly with a co-applicant?

Yes, many banks permit joint home loan applications with family members, spouses, or business partners to enhance eligibility and share the repayment responsibility.

How is the structure of home loan repayment organized?

Home loan repayment typically occurs through Equated Monthly Instalments (EMIs), encompassing both principal and interest components. The loan tenure can range from a few years to several decades.

Are there any tax benefits associated with home loans in India?

Certainly, home loan borrowers can avail of tax benefits under sections like 80C and 24(b) of the Income Tax Act, covering the principal repayment and interest paid, respectively.

How is property valuation conducted in the home loan process?

Banks or HFC usually appoint a valuator to assess the property’s market value, ensuring it aligns with the loan amount requested.

Can I prepay or foreclose my home loan before the designated tenure?

Yes, most lenders allow prepayment or foreclosure of home loans. However, certain charges may apply, so it’s advisable to check the terms and conditions.

What is the role of a guarantor in the home loan process?

A guarantor is someone who provides a guarantee for the repayment of the loan. However, not all loans require a guarantor, and the necessity depends on various factors.

What steps should I take if I encounter difficulties in repaying the home loan?

If faced with financial challenges, it is recommended to communicate promptly with the lender. They may offer solutions such as restructuring the loan or providing a temporary relief plan.