Buying your own house is a significant milestone in everyone’s life. Most people in India use a housing loan or a home loan to fund their dream of owning a home. However, the home loan process can be quite overwhelming and confusing to most people. In this article, we will walk you through the entire home loan application process and the nitty-gritties of documentation, eligibility, and interest rates.
Step 1 – Research and understand the home loan procedure
Before you apply for a home loan, it’s essential to understand the procedure and do your research on different lenders and loan schemes. Home loan procedure varies from lender to lender, but the basic steps involved are:
• Application: Submit the home loan application form along with the necessary documents and application fee.
• Processing: Once you submit the application, the lender will begin to process it, which includes assessing your eligibility, verifying documents, and evaluating the property you plan to buy.
• Approval: If everything is in order, the lender approves the loan amount and issues the home loan offer letter.
• Disbursement: After you accept the offer letter, the lender disburses the loan to the seller/builder/supplier in installments as per the agreed-upon schedule.
Step 2 – Understand home loan eligibility criteria
Every lender has set eligibility criteria for a home loan, which includes:
• Age: You must be at least 21 years old to apply, and the loan must be repaid before you turn 70-75 years old.
• Income: Your income must meet the minimum required by the lender, which can vary from Rs. 25,000 to Rs. 1 Lakh per month, depending on the lender and your location.
• Credit score: A good credit score is essential to get a home loan. A score above 750 is considered good and can help you get a lower interest rate.
• Employment: You must be employed or self-employed for at least two years to be eligible for a home loan. Some lenders may require you to be employed with the current employer for a specific period.
Step 3 – Calculate your eligibility and home loan EMI using an interest rate calculator
Most lenders have an online home loan eligibility calculator and an interest rate calculator. These tools help you calculate your eligibility for a home loan and the estimated EMI (equated monthly installment) based on the loan amount, interest rate, and tenure.
You can use the home loan interest rate calculator to compare different lenders and their rates. The interest rate can vary from 6.7% p.a. to 9% p.a., depending on the lender, loan amount, tenure, and your creditworthiness. Choose a lender that provides the lowest interest rate with favorable terms and conditions.
Step 4 – Collect home loan documents
The next step is to collect all the necessary documents required for a home loan. These documents include:
• Identity proof: Aadhaar card, PAN card, Voter ID, Passport, Driving License
• Address proof: Aadhaar card, Utility bills (electricity, water, gas), Passport
• Income proof: Salary slips, Form 16, ITR (Income Tax Return), bank statements
• Property documents: Property purchase agreement, property ownership proof, NOC from the builder/society, property tax receipts, property possession certificate
Ensure that you have all the original and certified copies of these documents as per the lender’s requirements.
Step 5 – Submit the home loan application
Now that you have all the documents and have calculated your eligibility, you can proceed with submitting the home loan application. Fill the application form carefully, attach all the required documents, and pay the application fee. The application fee can vary from Rs. 500 to Rs. 5,000, depending on the lender.
Step 6 – Wait for the lender’s decision
Once you submit the home loan application, the lender will begin to process it, which takes 3 to 4 weeks. During this period, the lender will verify your documents and assess your eligibility. If they require additional information, they will contact you.
Step 7 – Accept the home loan offer
If the lender approves your loan, they will send you a home loan offer letter, which contains the terms and conditions of the loan, including the loan amount, interest rate, tenure, and the EMI. Read the offer letter carefully and accept the offer only after you completely understand the terms and conditions. If you have any doubts or questions, contact the lender before accepting the offer.
Step 8 – Complete the disbursal formalities
Once you accept the offer, the lender will proceed with the disbursal of the loan. You will be required to sign the loan agreement, pay the processing fee, and provide post-dated cheques or an ECS mandate for the EMI. The lender will verify all the property documents, and once everything is in order, they will disburse the loan to the seller/builder/supplier as per the agreed-upon schedule.
Applying for a home loan can be an overwhelming and confusing process, but with some research and understanding of the procedure, you can make it a seamless experience. Keep in mind the eligibility criteria, calculate your eligibility using an interest rate calculator, and collect all the necessary documents before submitting the application. Choose a lender that offers a lower interest rate and favorable terms and conditions. Finally, read the offer letter carefully before accepting it, and complete the disbursal formalities to seal the deal.