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What is the Process of Home Loan Application

Updated: Mar 09, 2022
Part-Payment-on-Home-loan-Uses-and-Benefits

With easier access to home loans, buying your dream house has never been so easy. Yet, many homebuyers struggle with the questions- how can I get a home loan or what is the home loan process?

If you are struggling to find the answer, this blog article is for you.

Before taking the first step in your journey to own your dream home with a home loan, it’s important to get yourself acquainted with all the home loan procedures.

While you can take a home loan from any lender, the overall home loan process is common for all.

Step-by-Step Explanation to Home Loan Process in India

The following is the step by step process of how to apply for a home loan in India.

Step 1: Applying for Home Loan

The very first step to your home loan process starts with the formal application to the lender. You need to submit a filled-in home loan application with the necessary documents. You can do this online by clicking the “Apply now” button on this page and filling in the form with the required information.

The following documents are required to be submitted at this stage:

  • PAN and KYC documents
  • Bank statement for last 6 months
  • Income details-for salaried- last 3 months salary slips, ITR and Form 16 for the last 2 years
  • Income details-for self-employed- last 2 years ITR, CA audited financials, proof of business existence

Documents of the house property you wish to purchase:

  • Sales deed or stamped sale agreement
  • NOC from the society or property developer
  • Possession certification
  • Detailed estimate of construction cost
  • Proof of payment receipt of down-payment to the property developer
  • Occupancy certificate (if it is a constructed property)

Please note that this is just a basic list for your reference. Depending on your profile and the property you want to purchase, additional documents may be requested.

Step 2: Evaluating Your Eligibility

After the lender receives your application, they will evaluate your repayment capacity as well as overall eligibility by analyzing the CIBIL score, income details, existing loan obligations (if any), and the size of the home loan amount.

Step 3: Home Loan Application Verification

The lender will initiate further processing by evaluating the details provided in the home loan application.

You may be contacted by the lender’s representatives to have a face-to-face discussion, in which they will try to understand your repayment capability and clear any doubts related to the documentation process.

Post-interaction, the lender will initiate the process to verify the documents, in which officials may visit your present residential address, office address, and the property you wish to purchase.

Any fake / incorrect documents or mismatch in information at this stage can result in the rejection of the home loan application. Please note that since property evaluation is also involved, the process may take 15-21 days.

Must Read :Afraid of Getting Home Loan Application Rejection?

Step 4: Approval Stage

Now comes the most important stage, the approval and issue of the sanction letter.

At this stage the lender has two options- either to reject the home loan application or approve it with appropriate terms and conditions.

If the home loan application is approved, you will be contacted by the lender to discuss the home loan interest rate and other terms and conditions of the loan.

After getting your confirmation on the terms, the lender proceeds to issue the sanction letter. The sanction letter includes the following details:

  • Sanctioned loan amount
  • Rate of interest rate
  • Fixed or floating interest rate
  • Loan repayment tenure
  • Mode of loan repayment
  • Terms and conditions of the home loan

You need to sign the loan sanction letter (or loan agreement, in some cases) to indicate your acceptance of the terms and conditions, a copy of which will be kept by the lender for its records as an acceptance copy.

Step 5: Property Deed

Before disbursal of the sanctioned home loan amount, the lender will carry a final legal and valuation check of the property. In this stage, you need to submit the original documents of the property and hand over the rights of your property deeds to the lender.

The house property you will buy using the home loan acts as collateral, and in case of default, the lender will have the right to take over the property. Only after full repayment of the home loan, the lender will hand over the property documents to you.

Step 6: Home Loan Disbursal

Following all the checks and formalities are completed, both legal and technical, the lender will disburse the home loan amount. The lender can make direct payment to the property developer or credit the amount in your bank account if you are self-constructing the house property.

Step 7: Payment of Home Loan Processing Fee

You need to pay the non-refundable home loan processing fee that is usually a small percentage of the home loan amount.

The payment of the processing fee marks the commencement of processing of your home loan application by the lender. Usually, the lender may take a cheque from you after loan approval, or may deduct this amount and then disburse the rest of the loan amount as in the previous step.

Knowing all the processes on how to get a home loan beforehand ensures a smooth and hassle-free home loan application process. However, before applying for the home loan, ensure you meet all the eligibility criteria prescribed by the lender to improve your home loan approval chances.

Must Read:Tips To Make Home Buying Process Less overwhelming

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