The first and foremost question that accompanies the decision of buying a house is the source of finance for the same. It is very unlikely that buyers pay the full amount in cash in a single payment while buying a house. Mostly finance is sourced through financial institutions in the form of home loans. Buyers have a sea of options to choose from for their loans. Buyers must get familiarised themselves with the steps involved in getting a home loan.

Formal Loan Application

Filling up a loan application form is the first step in the process of getting a home loan. Irrespective of the financial institution or bank that the buyer chooses, filling up the application form is a compulsory procedure. The personal details of the buyer, residence address, education details, job and income, details of the new property, forecasted value, source of down payment etc. should be filled in the relevant sections of the application form completely.

Along with the application form, copies of proofs of income, identity and residence, bank statements, qualification certificates and all relevant details of the new property should be submitted to the bank. These proofs are required by the bank to assess the credit worthiness and repaying capacity of the buyer.

Processing Fees

All the home loan providers charge a certain amount as processing fee. When the final loan value is disbursed to the buyer, it will be the net amount after deducting an average of 0.25 or 0.5% of the loan amount as processing fees. This is the amount that the banks charge for carrying out all the processes required right from the beginning to the end of the loan process.

Evaluation & Verification of the Applicant

Once the buyer submits the application form and all relevant documents successfully to the bank, the latter will start checking the form and documents. As part of checking, one of the bank officials will meet up with the applicant personally to understand his credit-worthiness and whether he has the capacity to repay the loan properly.

Once this evaluation proves successful, the next stage is where the documents provided by the applicant are re-checked and verified by the bank officials by cross-checking the data with the required people. Executives are appointed to conduct an investigation on the field with all necessary contacts to ensure that the facts submitted the applicant, are genuine.

Repayment Verification

This is the most important step in a loan process. Here, the repayment capacity of the buyer is assessed. It is this step that decides whether the buyer can be given the loan or not. If the buyer’s financial health doesn’t appear convincing to the bank and it doesn’t get the confidence that the buyer will be able to repay the loan, then the loan application is rejected at this state. Only when the repayment capacity is found to be ok, the loan amount is sanctioned. Sometimes the bank sanctions a conditional loan to the buyer, in which case, the buyer needs to first satisfy all the conditions imposed by the bank for getting the loan amount.

Offer Letter for Home Loan From the Bank

Once all the formalities are completed, the banks sends an offer letter to the buyer containing all details about the loan like amount, tenure, rate of interest, type of interest (fixed or floating), terms and conditions of the bank for disbursing the home loan, how the buyer will repay the same etc.

If the buyer agrees to all the terms and conditions stated in the offer letter of the bank, then he must send an acceptance copy to the bank, which the bank will maintain safely in its records as a valid proof. Once the buyer agrees to the conditions, he must pay the administrative charges (if any) to the bank at this stage.

Property Verification

The bank will then proceed to check and evaluate the property. Home loans are always “Secured loans” where the property to be purchased is given as a collateral. Therefore, the property is thoroughly assessed by the banks and check for all important documents like No Objection Certification, Title Report etc.  The bank collaborates with legal experts in order to check that the property’s title is clean. When ownership of the property is under dispute, then loan will not be provided. Professional evaluators are employed by the bank in order to check the technical specifications and to come out with the final estimate of the property.

Home Loan Disbursement

After the long process of checking, evaluating and verifying all documents, the bank will then start with the process of registration of the property in the buyer’s name. For this purposes, all stamp papers are prepared by the bank, with the help of legal professionals. After reading through these, the buyer confirms his agreement through a signature and submits post-dated cheques to the bank as per the request. Once both the parties agree to these terms and conditions, the bank releases the loan amount to the buyer either as a single payment or in instalments, as agreed with the buyer.