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