With the rising popularity of home loans and ease of application, more banks and financial institutions offer competitive loan deals, which facilitate new house purchases, construction, renovation and other housing needs. If individuals meet the eligibility and documentation requirements, they can avail of cost-effective loans at lower interest rates. Additionally, if you understand the home loan procedure, it may simplify loan planning and help you stay on schedule.
Easy Guide to the Home Loan Procedure in India
The housing loan process can be lengthy and entails specific documentation. Due to the secured nature of the loan and higher principal sums, lenders run stringent checks and verify the requisite documents when assessing each applicant and property.
Prior to applying for a house loan, you need to be aware of the following steps:
Step 1: Appraise Your Eligibility
First, see if you qualify for the loan. A score of 750 and above is accepted as a good CIBIL score for home loan eligibility. Lenders may have certain eligibility criteria that applicants must fulfil. These generally include your age, income, job profile, credit records, property valuation and other relevant aspects, which allow lenders to evaluate your credit behaviour and ability to support the debt. Lenders also provide free access to user-friendly home loan eligibility calculators on their websites to help you ascertain loan eligibility within minutes.
Step 2: Determine the Loan Amount and Tenor
Once you find yourself eligible for the loan, choose the appropriate loan amount and tenor. This is a crucial decision and you should consider the cost of the property that you wish to buy, your income, regular expenses and other commitments. It is best to opt for a loan amount that you can comfortably repay, rather than the one that you might be rendered eligible for
Likewise, select the tenor based on your monthly budget. A longer tenor will reduce the EMI amount but add to the overall interest; while a short tenor will restrict credit costs and increase the instalment sum, letting you close the loan earlier. You can use a house loan calculator to compute the payable EMIs that align with your finances.
Step 3: Send in Your Loan Application
You may apply for a housing loan through the lender’s portal online or physically visit their branch office. Fill in your personal and professional information along with property specifics correctly. Then, attach the necessary documents required for the home loan and submit the form.
Step 4: Loan Approval and Sanction
After lenders evaluate your application and find everything satisfactory, they will issue a sanction letter mentioning the principal amount, interest rate and other related information.
Step 5: House Loan Disbursement
Upon completion of all the paperwork, verification and formalities, lenders will disburse the stipulated loan amount. Depending on the agreed terms, they may either transfer it into your account or pay directly to the builder or property seller.
Documents Required for a Home Loan
The documentation requirements may vary among lenders. They normally ask for the following list of documents during loan processing:
- Proof of age and identity – Aadhar card, passport, PAN card or driver’s license
- Proof of address – Voter ID, passport, Aadhar card or utility bills
- Income documentation – Bank statements, Form 16, income tax returns, salary slips, etc.
- Property documents – Builder’s NOC, sale deed and agreement, property tax receipts and more
Select the Type of Interest Rate
The type of interest rate on your house loan is set right from the beginning. You may take your pick from either a fixed interest rate or a floating interest rate. In the former case, the interest rate remains constant till the end of the tenor. Thus, your EMI stays the same making repayment planning easier. However, fixed interest rates may be costlier than floating interest rates.
Conversely, a floating interest rate is flexible and may alter with market fluctuations leading to a rise or fall in the EMI amount. Those who want to benefit from reduced interest rates and are willing to accept variations in their loan repayments can opt for floating interest rates.
Before making any decision also have a look at: Complete Guide To The Home Loan Process
Summing Up
The home loan procedure may seem a bit of a stretch but things can move smoothly if you do your homework in advance. Compare loan details of different lenders and study their requirements closely. Check the rates of interest and service offerings before selecting a lender who fits the bill. You must also possess a flawless credit record to leverage favourable interest rates and terms for a modest debt obligation.