What is the Process for Home Loan

If you have decided to purchase a home, the next step would be to look for the best lender and apply for a home loan. Applying for a loan involves many step-by-step tasks. Read one to know more about the home loan process.

If you want to buy a pre-owned property or construct a home, one of the best ways to get the necessary funds is to apply for a home loan. It gives you the flexibility to repay the amount you borrow over 15-20 years, which makes the repayment easy. Also, many lenders in India provide home loans at an attractive interest rate. Choosing the right lender and knowing the processes involved is vital to ensure that you complete the borrowing process in a stress-free manner. Below-mentioned is the various steps involved in the home loan application process.

Application form

Applying for a home loan starts with submitting an application form. It must be duly filled with the necessary details and signed by the borrower and the co-borrower. The form essentially requires you to provide personal information, details of your income/finances, details related to the property and the amount you wish to borrow. Along with the application form, you must also submit essential documents like identity proof, address proof, employment ID, bank account statements, and investment proofs.

Personal discussion

After you have formally submitted the application form, you must wait until the lender reviews your application and the documents. This usually takes about 4-5 days, and then they may call you for a personal meeting to gather more information about you and assess your repayment capacity.

Background check

The lenders in India receive hundreds of home loan applications, and they view every application as a risk. So, it is only natural that they do a background check on the details that you have provided in your application and validate the same. The lender will do a background check of the employment, employer credentials, income drawn, residential address, criminal records. The lenders usually send a representative to your home to verify the details.

Credit appraisal

This is a critical stage in the home loan process. It is a make or break stage; if the lender is convinced about your repayment capacity, they will sanction the loan. The lender will assess the repayment capacity based on your monthly income, assets owned, nature of work, the reputation of the employer, years of experience, credit history, debts owed, etc. Based on the assessment, the lender will decide the loan amount they are willing to sanction and the same will be communicated to you by issuing you a sanction letter.

Offer letter

Once the lender sanctions the loan, they will send you an offer letter, which will have all the important details of the loan including –

• Loan amount
• Interest rate and nature of interest rate (fixed or variable)
• Loan duration
• Mode of repayment
• The details of the special scheme under which the loan is applied (if any)
• The general terms and conditions

If you agree to the terms and condition, you must give your acceptance and submit the letter back to the lender with your signature.

Legal check of the property

Once you provide your acceptance, the lender now shifts the focus from you to the property. The lender will appoint a legal team to verify the property-related documents and see if the property you wish to buy is clear of legal titles. Also, the lender will check if the builder has acquired all the necessary NOC from the concerned authorities.

Technical inspection of the property

If the lender is satisfied with the legal papers of the property that you wish to buy, they will appoint an expert to do a technical inspection of the property. The expert will check for the quality of the construction, the structure of the building, safety measures in place, quality of the materials uses, the building plan and if it is built as per the government building norms, etc.

Disbursement

After the technical inspection completed if the lender is satisfied that the property is technically right and legally clear, they will release the loan amount. Typically, the amount is paid directly to the builder or the seller and as soon as the amount is dispersed, your EMI starts.

Beatrice Merlin