Home loan procedure at a glance

Presently, a majority of the urban population depend on housing finance to fulfil their dream of purchasing their own property. Hence, it is considered one of the most common borrowing options for prospective home-buyers.

• On average, the home-loan ticket size witnessed a massive rise and reached Rs.26 lakh last year. Along with that, certain government-backed schemes, such as PMAY, reduction of repo rate fuelled such growth.

Nevertheless, intending borrowers should be well-aware of the procedure before considering to avail a home loan to ensure a hassle-free loan approval. 

Guide on home loan procedure 

Since everyone is not well-acquainted with the home loan procedure, increasing the chances of loan rejection, prospective borrowers must know about the lender specific criteria. Therefore, read on to learn more about the procedure to apply for a home loan, its eligibility, etc., before planning to avail a home loan.

• Application for a home loan

Usually, a home loan procedure begins with an application form where borrowers need to fill in necessary information involving personal details, employment and financial information, contact information etc. But before thinking to avail a home loan or any other credit, one needs to fulfil the specified eligibility parameters and produce certain documents.

For salaried

• Applicants should have a stable income source with a minimum experience of 3 years
• Age should be between 23-62 years
• Must be an Indian resident

For self-employed

• Age should be between 25-70 years
• Should be a resident of India
• One should possess a business vintage of minimum 5 years

Besides meeting eligibility parameters, one needs to submit the following documents before applying for a home loan-

• KYC documents
• Passport-sized photographs
• Account statement for previous 6 months
• Income proof involving present salary slip/Form 16 (Salaried) and Profit and Loss statement, business existence proof and ITR documents (Self-employed)

Apart from these documents, borrowers need to provide property documents that include sale agreement, payment receipt, allotment letter etc. In such cases, borrowers can take help of an online home loan calculator to determine the exact loan amount and payable instalments before availing the credit.

• Payment of processing fee

After applying for the loan, applicants are required to pay a nominal percentage which usually ranges from 1%-2%. However, the processing and other associated charges vary from one lender to another. But if the borrower fulfils the eligibility parameters efficiently, he/she can negotiate regarding processing fees and levied home loan interest rates.

• Verification of application 

After paying the processing fees, lenders proceed further with the loan application. In this stage, lenders will verify borrowers’ credentials; conduct a thorough background check of an applicant’s financial and personal profile. If required, a representative of the respective financial institution can visit the provided address to authenticate the provided information.

• Assess repayment capacity

It is one of the essential parts of the home loan procedure. After estimating the repayment capacity, lenders determine the maximum credit that one is eligible for. This loan approval amount includes LTV, a maximum percentage of loan amount that can be availed against the mortgaged property.

To enhance the chances of loan approval, one must maintain the following factors apart from eligibility-

• Monthly fixed obligations or FOIR must not exceed 50%
• Maintain credit utilisation ratio within 30%
• Credit score must be 750 and above

Apart from these, individuals can use a home loan eligibility calculator to figure out the exact loan value they can avail depending on other financial factors. Through this, borrowers can ensure higher chances to avail a home loan quickly.

• Verification of property 

Next, the respective lender proceeds with the verification of property to ensure that the mortgaged property is free from legal disputes. This verification includes total valuation of property, property’s age and location, title deed verification, etc., and completing the home loan process.

• Disbursal of loan amount

This is the final stage of home loan process, where the amount is disbursed to the agent, seller or builder. Moreover, if the property is under construction, the disbursal amount is divided into several parts based on different stages of construction.

When proceeding with the loan application, existing home loan borrowers can take a look at the pre-approved offers, allowing them to bypass the lengthy application procedure and the hassle of documentation. Reputed financers provide personalised pre-approved offers that make the financing quick and simplified. These offers are available on a broader range of financing options, such as a loan against property, home loan etc. To check the pre-approved offers online, individuals need to mention their name and contact information.

Therefore, as a prospective home buyer, one needs to understand the entire procedure in detail and assess his/her repayment capacity beforehand before planning to avail a home loan. Furthermore, it is wise to compare different financial lenders and settle for one that offers a lower interest rate and flexible repayment option.