Seek and you shall Find

Interest received is the main source of income for banks and financial institutions. They generate interest income through the loans and advances offered. The big-ticket loans offered to industries and corporates are a major source of interest income. However, when it comes to retail customers, home loans are a significant form of credit. A home purchase is generally the most important purchase in personal life, and often the most expensive too. No wonder, choosing the right home loan is a crucial process. Without further ado, let us look at the home loan process in complete detail.

The preparation before the process

Before you start the home loan process, it is important to prepare adequately. The first step is to ascertain if your finances are in a position to take the pressure of a home loan EMI. And if yes, then to what extent. It is only when you are sure that your finances are sufficient to meet the monthly home loan EMI that you should proceed with the loan.

Loan Application

Whether you are applying offline or online, your home loan application process starts with the application form. This form captures the basic information about the applicant, most of which are relevant for processing the loan. Here is the list of information that can typically be asked of you while you are filling out the home loan application form.

• Personal details like full name, phone number, email id etc.
• Address of residence, office and correspondence of the applicant,
• Education qualification of the applicant,
• Employment-related information,
• Income of the applicant,
• Information of the house property for which the loan is applied, including its estimated cost, etc.

To authenticate the above information, you will have to furnish supporting documents –

• Your identity and age proof will authenticate your personal details,
• Address proof,
• Proof of employment including latest salary slips, offer letter, a letter from employer etc.
• Bank statement for the income proof,
• Education certificates to verify your educational qualifications,
• Property related papers.

As you submit the application form along with the supporting documents, you will be asked to pay a processing fee. This varies from organization to organization. Once submitted, the loan processing phase starts. However, the lender may meet or contact you to gather additional information as and when required.

Loan Processing

It is as a result of loan processing that a home loan application is accepted or rejected. Acceptance of a loan is also an acceptance of risk for the bank. Thousands of aspiring home buyers apply for a home loan every day, and not all of them have the credibility or the repayment capacity. The bank has to check the loan application against a host of parameters.

• To begin with, the lender has to check the authenticity of the documents and information provided by the applicant. Forged, inaccurate or insufficient documentation and information are not accepted by any lender. Thus, there is a part of the loan processing activity that involves the hygiene check of the application form, supporting documents and information therein.
• Apart from the documents, the lender may choose to visit the applicantʼs workplace or office to cross-verify the information provided. In the case of a self-employed applicant, the lender may also verify the nature of the business and its financial strength.
• The lender will also check the credibility of the applicant. Credit scores are the usual reference point for this purpose, as it indicates the credit behavior of a person. Someone with a high credit score is not only more likely to get a home loan approved, but can also manage to land favorable loan terms.

Loan Offer

Based on its findings, the lending bank would either accept or reject the loan application. It can also go for the middle path, which is to offer a loan for a revised amount. This decision is based on your eligibility for the loan. The certified offer letter is sent by the lender to the applicant. It will mention the loan amount sanctioned, the interest rate, the rate calculation mechanism – fixed or variable, loan tenure, repayment related details and other terms and conditions. Once you accept the offer letter, the bank retains a signed copy of your acceptance for its records.

Property related checks

The disbursal is a home loan linked to the property and its completion. The lender would ask for the documents related to the chosen property. These would include information on the seller, the name and address of the property, NOC from the primary or actual owner, NOC from the lessor if applicable, NOC from the housing society or board etc. It will also include technical checks like the quality of construction, stage of completion, completion time, property valuation, layout, age of the property, approvals, existing mortgages against the property etc.

Checks done for under construction, new and resale properties may vary from one another

Disbursal

Based on these checks the lenderʼs legal team finalizes the loan deal and a Memorandum of Execution is created. Once all the paperwork is done, the home loan disbursal is done. The repayment schedule soon ensues!

But what if you already have an active home loan and want to apply for a balance transfer. Here is an insight into the balance transfer of a loan.

Balance transfer

Whether you are not happy with the after-sales service of your lender, or you have found a better interest rate elsewhere, a balance transfer of loan can help your cause. To initiate this process, firstly you have to intimate your existing lender.

• An application is made to the present lender intimating your decision to transfer the loan, along with reasons for the same. Most lenders have a predefined format for a balance transfer application.
• The lender is required to present you with a NOC or consent letter. This will confirm to the new lender that you donʼt have any defaults or unsettled disputes with the existing lender, other than the upcoming EMIs
• The normal loan application procedure is carried out with the new lender, along with the NOC or consent letter obtained. In the meantime, the old lender will confirm the closure of your loan account.
• A new loan agreement is signed with the new lender, and the EMI cycle resumes for the remainder of the loan at the renegotiated interest rate. Do note that a processing fee may be charged by the new lender as a part of the balance transfer.

Aspiring and existing home loan borrowers can follow the processes elucidated above and enjoy a happy home loan journey. Home loans are long-term loans and it is wise to choose them with proper due diligence. Nevertheless, if your experiences with a home loan are not up to the mark, you always have the balance transfer option to fall back upon.