The process to get home loan in India involves several steps, which before digitization of banking were complex and time-consuming for applicants. Today, online house loan procedure is not only easy but also quick. Your loan can be disbursed within a week.
If you aren’t aware of the steps involved in the home loan process, read below:
What is the Home Loan Process?
- Fill Home Loan Application Form
- Submit Home Loan Documents
- Pay Home Loan Processing Fee
- Discussion with the Lender
- Documentation Process & Verification
- Home Loan Sanction Letter
- Property Verification & Legal Check
- Home Loan Disbursal
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Step 1: Fill the Home Loan Application Form
The procedure to avail home loan starts with filling out the application form wherein you have to provide your personal details along with other information related to your income, employment, existing liabilities, property, education, etc. You can fill out the home loan application form online as well as offline.
Step 2: Submit the Form and the Supporting Home Loan Documents
After filing out the home loan application form, attach supporting home loan documents and submit it to your lender.
Some of the home loan documents are:
- Proof of Identity (such as PAN Card, Aadhaar Card, Passport, Driving License, etc.)
- Proof of Address (such as Aadhaar Card, Passport, Driving License, Utility Bills, etc.)
- Proof of Age (such as Birth Certificate, 10thCertificate, Aadhaar Card, PAN Card, Passport, etc.)
- Proof of Educational Qualifications
- Proof of Income (such as Bank Statements, Income Tax Return, etc.)
- Proof of Business (such as Balance Sheet, Profit & Loss Statements, Business License, Proof of Business Address, etc.)
- Documents of the property to be mortgaged (such as approved copy of building plan, NOC from society/builder, estimated cost of house construction, etc.)
- All documents must be self-attested
- Besides the documents listed above, your lender may ask for more or less
Step 3: Pay Home Loan Processing Fees
After you submit the home loan application form along with all supporting documents, the lender might ask you to submit processing fee. Home loan processing fee is non-refundable and varies from one lender to another. It usually ranges between 0.25% and 1.0% of the requested loan amount. There are also many lenders who do not charge the processing fees. Lenders levy processing fee to commence home loan process and maintain the applicant’s loan account. It includes charges to send some confidential paperwork, such as like IT certificates, post-dated cheque, etc., every year. If you have applied for the loan through
For example, an applicant applied for home loan of Rs. 60 lakh. If the processing fee charged by the lender is 0.25%, then the amount that will go towards it will be Rs. 15,000.
Some lenders also keep a cap on the amount that goes as processing fee.
For example, an applicant applied for home loan of Rs. 75 lakh. If the processing fee charged by the lender is 0.50%, then the amount that will go towards it will be Rs. 35,000. But if the processing fee is subject to a maximum of Rs. 20,000 then the applicant will only have to pay Rs. 20,000 instead of Rs. 35,000.
Step 4: Discussion with the Lender
After the submission of the form and supporting documents, the applicant needs to wait until further notified by the lender. During these days, the lender will evaluate your details and decide the amount you are eligible for on the basis of your repayment capacity. During the process, your lender will ask you to pay visit for a face-to-face interaction before the loan is sanctioned. The personal interaction is requested to gather more information and assess your repayment capacity.
Check Also: Home Loan Prepayment Calculator
Step 5: Documentation Process and Verification
After personal interaction, the lender will proceed with the verification of the submitted documents and other details. To validate the information you have given in your home loan application, bank representatives may even visit your home or get in touch with your organization. During the checks, your lender will also request for your credit score and credit report from one or more credit bureaus (such as TransUnion CIBIL, Experian, Equifax and CRIF High Mark).
The process will be quick, provided the documents and information given are all in order and correct.
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Step 6: Home Loan Sanction Letter
After successful completion of the above steps, you will get the loan approval or sanction letter, which usually includes the following details:
- Sanctioned loan amount
- Applicable rate of interest
- Type of interest rate – Fixed or Variable
- Loan tenure
- Mode of repayment
- Special scheme (if applicable)
- Terms and conditions of your home loan
- Policies of your home loan
- Get Home Loan Tax Benefits
The letter may also include other details such as the policies related to your home loan.
After receiving the letter, sign and submit the acceptance copy to the lender, provided the content of the letter are acceptable to you. The acceptance copy is the duplicate of the sanction letter that lending institutions keep for keeping records. At this stage, administrative fees (if any) need to be paid to the lender.
Note: Before signing the dotted line, read all details given in the sanction letter carefully.
Step 7: Property Verification & Legal Check
Before disbursing the loan, the bank will verify the property pledged. You will be required to submit original copies of the title deed, no objection certificate, encumbrance certificate and other documents that your lender asks. A legal check will be made on the property to ascertain that the title is clear and that there is no dispute. Technical valuation of your property will also be conducted by the bank. Bank representative will visit the property site for inspection. In case of under-construction property, the bank will scrutinize the location of the property, the stage of the construction, quality and progress of the construction, etc. if the property is ready to be sold or is being re-sold, the bank evaluates its age, ownership, the quality of construction, maintenance, locality and legal clearances.
Step 8: Home loan Disbursal
On successful completion of the above steps, you will get the final agreement from the lender. And finally, the home loan amount will be disbursed as per the mutually agreed terms.
Note: The above steps are indicative as the process might differ from one bank to another.
What is full disbursement?
In case of under-construction property, the home loan disbursal is based on the construction stage of the residential property. In case of ready/resale property, the loan disbursement is full. This implies that the lender gives to full or complete payment via cheque.
What is partial disbursement?
In case of under-construction property, the loan payment is usually done in parts, which known as partial or part disbursement. In case of partial loan disbursement, the lender will not begin the EMI right away. Since the EMI is calculated on the total loan amount, the repayment dues on pat disbursement may not be applicable in the beginning of the loan tenure. To resolve this, many lender levy interest on the loan amount that is partly disbursed.
Check Also: Home Loan EMI Calculator
How lenders determine loan borrowing capacity of an applicant?
Banks determine your loan borrowing capacity on the basis of several factors, some of which are:
Age: Your home loan tenure depends on your age. Most banks prefer that the borrower should not be more than 58 years of age when he pays his last EMI. Your home loan tenure depends on your age. Applicants who are 50 years old will be given loan repayment tenure of 6 to 10 years. Applicants who are 35 years old can get the loan repayment tenure of up to 25 years.
Salary: Most banks don’t consider allowances, perks, bonuses and performance-linked pay as a part of your salary. Your loan eligibility is likely to go down if these components comprise a considerable chunk of your salary package.
Existing Liabilities: A borrower’s liabilities (including EMIs of other loans taken) should not exceed 55 to 60 percent of his/her monthly income.
Fixed Obligation to Income Ratio (FOIR): These are the primary criteria for deciding the home-loan eligibility of an individual. Most banks assume that up to 40 percent of a borrower’s monthly income can be directed towards the payment of EMI.