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What You Need To Know About The Home Loan Process

Do you know what are the steps involved in getting a home loan? Here we help you understand the home loan process from the time your file your application to when the loan gets disbursed.

1. Your "home" work: When applying for a home loan, you need to do some homework on your own to be better prepared for your application. You must do the following:
   
   • Finalise your budget: Review your finances and determine how big a house you can afford. What is your capacity to take on EMI payments towards the home loan? What is the monthly amount you can comfortably afford, without compromising your fixed expenses towards your kitchen and living expenses, children's school fees, transportation etc? Analyze what is the current monthly surplus that you are generating after paying all bills, and how this might improve going forward given realistic prospects for a rise in your income.
   
   
   • Gather funds for your down payment: When you take a home loan, the lender will require you to put up a part of the purchase price towards the property out of your own pocket. This could be as much as 20% of the total price. It is advisable to save this amount well in advance of your actual purchase rather than face a last minute scramble to gather these funds later.
   
   
   • Decide your preference for kind of home and location: What kind of home do you want? Where do you want to live? Are schools and shopping centrally located to the destination you have in mind? Is the location you have selected accessible? Decide what are your criteria for your home. It can save you time later on, even if you have not made a final decision.
   
   
   • Recognize that some areas and builders might not be financed: Lenders have their own criteria on what locations and types of lands they might be willing to lend for. Certain farmlands, and village lands, for example "Lal Dora" areas in Delhi/NCR, aren't financed by any lender because establishing valid ownership and construction rights might be a problem. Similarly, there might be certain builders blacklisted by lenders, and you might find it difficult to get a loan for their projects. Remember to verify that the property you are interested in is legal and from a reputable builder.
   
   
   • Collect necessary documents: Make yourself aware of all the documents you will need to apply for your home loan and start gathering them. Take care of these administrative activities in advance, so that when a lender asks for additional documents you are well prepared to respond quickly. Documents needed include your income proof, age proof, identity proof, address, letter of employment, educational background and bank details.


2. Pre-approval: Once you have done your homework, you can apply for pre-approval for your loan. Pre-approval is a process whereby you can get the financing approved from a lender even before selecting a property. Many borrowers like to get a pre-approval for their loan. With this in hand, one can act quickly and decisively once a property has been selected, because one does not have to wait for a loan approval. This can help in facilitating a speedier closure to the property transaction. The approval process involves the following:
   
   • Loan eligibility based on income: The lender decides the loan amount you are eligible for, based on your income and age. However, the amount is disbursed to you only after you have identified a home.
   
   
   • Verification: The lender verifies the details that you have provided including your employment and income details. In case you have selected a property during pre-approval, then a legal and valuation check is carried out on that property.
   
   

   Pre-approval expires within six months. This means that you will have to select a house, in case you are buying from a developer or a third party, within this time frame, or else the approval will no longer be valid. Additionally, you need to pay the required processing fee to your lender for getting a pre-approval. If the six month period lapses and you still haven't selected any property, then you will not be returned the processing fee that you paid earlier. Once you re-apply for a loan you might b required to pay another processing fee.

   You can of course also apply for a loan approval once you have selected a property. The process and criteria for approval is no different, just the sequence of events will be different.



3. Steps involved in buying the property: Assuming that the pre-approval process is done, selecting the property will involve:
   
   • Working with the seller: You will need to coordinate with the developer or an agent of the seller while selecting the property.
   
   
   • Legal check of the property: Once the property had been selected, the lender will conduct a check to confirm the legal status of the property and verify that it is not under dispute.
   
   
   • Title deed and chain of ownership: A title deed needs to be produced as evidence of ownership to the lender. If you are buying a new property or an under construction property, this requirement might be different.
   
   
   • Sanctioned plan from relevant authorities: For a self-constructed property or for a new project by a developer, lenders will want to see sanctioned building plans from the local authorities.
   
   


4. Disbursal: After the property has been selected, the lender prepares for loan disbursement. This includes:
   
   • Submission of original documents: The lender keeps the original documents pertaining to transfer of ownership of property from the seller to the buyer.
   
   
   • Choosing a transaction date: After your and the lender's mutual consent, the transaction date for the disbursement is decided.
   
   
   • Sharing bank account details in advance: The developer or builder's bank account details and name need to be provided in advance to avoid any discrepancies during transfer of funds.
   
   

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