Home Loan Process

For most of us, purchasing a home is a significant personal and financial milestone of life. It takes years of savings to come up with a huge amount. But with the ever-rising property rates, savings of a few years are just not enough. At best, you can use that amount as down payment towards a home loan. Yes, you can purchase your dream home by taking out a home loan offered by banks, housing finance companies and even non-banking finance companies (NBFCs). These lenders make it easy for you to purchase your dream home. But the entire process of getting a home loan can be time-consuming, which is why it is better to be aware and prepared for it, before you take out a home loan. That's why we have listed out the entire home loan application process, step by step.

Step-by-step guide for home loan application

Before you approach a lender for the home loan, it is best to do your homework. Zero in on a property you wish to purchase, and check which lenders have pre-approved it. Most lenders are also tied up with builders and projects and you can enquire about the same as well. Also, compare the interest rates offered by different lenders and choose one that suits your requirements before you begin the home loan application process. Here's how you should go about it.

Step 1 – Submit a duly filled loan application form and provide the necessary documents: The loan application form is a very basic form in which the lender asks you to provide your general details such as your name, phone number, residential address, monthly and annual income, employment details, details of the property you intend to buy, estimated cost of property, down payment you can provide etc. You must attach all documents to support the information provided in the application form. You need to provide

• PAN Card
• Identity and age proof – Aadhaar Card, Passport, driving license, Voter ID card etc.
• Address proof – Aadhaar Card, Passport, driving license, Ration Card etc.
• Employment details – details about your employer
• Educational proof – school, college, and graduation certificates etc.
• Bank Statements of the last 6 months – 2 years as requested by the lender
• Proof of income
• Property details

Step 2 – Payment of the loan processing fees: Your lender will charge you a loan processing fee, which is non-refundable. You are typically charged 0.25% to 1% as processing charges, depending upon the lender. The processing fee is collected in lieu of maintaining your loan account and all the background verification conducted by the lender before processing the loan.

Step 3 – Verification of the applicant and documents and evaluation of repayment capacity: This is the perhaps the most crucial step in the home loan application process. The lender evaluates your application and determines whether or not to grant you the loan. The lender will have a face to face interaction with you and may even visit your home and/or work place to validate the information provided by you. They will also check your credit scores. Based on their findings, they will determine the principal loan amount you are eligible for based on your documents, credit scores and repayment capacity.

Step 4 – Approval of the loan: Once the lender is convinced of your loan repayment capacity, they will draft a loan sanction letter. The letter provides details about the principal amount sanctioned, interest rates, tenure, mode of repayment and applicable terms and conditions. If the loan terms are acceptable to you, you must sign the sanction letter and submit it to the lender. Remember to keep a copy for your records too.

Step 5 – The lender verifies the property: The lender may have accepted your loan request and extended an offer letter, but they will verify the property you intend to purchase before they actually disburse the loan application. You must submit the original copies of the documents of the property you intend to buy such as the property title deed and no objection certificate and similar other documents as requested by the lender.

Step 6 – Your Loan is disbursed: This is the final step in the home loan process in India. Once you have completed all the formalities as mentioned in the steps above, your lender and you can commence the loan registration process.  You need to prepare the necessary legal documents in the format that your lender's lawyer provides on a stamp paper of the denomination stated by the lender. You must also bear the stamp duties based on the state in which you are purchasing the property. And finally, you must submit the post-dated cheques of the loan EMIs after which the lender will begin disbursing the loan amount, in lump sum or stages as per the terms mentioned in the loan agreement.