One of the primary investments anyone makes is for a house. But for many, it remains a dream for a long time, and for others having a second or third home is the next big priority. Getting to own a house is security bought with hard-earned money, even if you had to borrow.
Here’s a step-by-step guide to completing the home loan process.
Owning a home may cost your savings of a lifetime or a home loan which you pay back in installments at the prevailing housing loan interest rate. The point is buying a home is not a walk in the park. You have to locate a locality for building a house and apply for a home loan which will have to be paid back in equated monthly installments (EMIs) during the loan tenure agreed upon.
That said, applying for a home loan has become simpler with the digitization of the banking industry.
The first step is filling up and filing the home loan application form with the lender. You need to provide details like name, age, address, mobile number, occupation, income, educational qualifications, etc.
It will also seek details of the house the borrower intends to buy and the likely cost of the house. The lender will ask for id proof and proof of address, income, and employment—income certificates and income returns of three years.
The bank verifies the documents submitted by the applicant. It will take up to two days for the verification of the documents. The bank may demand the application present itself in person to confirm whether the applicant can repay the loan in the time given.
The lender also conducts a background check of the applicant. The information given in the application will be matched with the investigation results.
It is now mandatory for credit rating agencies to provide customers with an annual credit score report to apply for home loans. A credit score of over 750 is consistent with credibility in repaying loans taken earlier.
The bank will ask for a non-refundable loan-processing fee. This could be between 0.5 percent and 1 percent of the loan principal. That said, not all banks ask for the processing fee. They say this attracts home loan applicants to take advantage of housing loan interest rates.
Evaluate repayment capacity
This is, without doubt, the most important part of the verification process. Does the borrower have the repayment capacity? The home loan application will be accepted or rejected depending on the answer. The borrowers who apply for a home loan should have the ability to repay on time, month after month.
This step comes after the home loan has been sanctioned. The borrower will be asked to submit original property documents, which will remain with the bank till the loan is fully repaid. The documents will include all papers of the property concerned. The bank will verify the documents before giving its final approval to the home loan. The bank will also physically verify the property.
When everything is completed the home loan process comes to its final stage— the disbursement of the home loan to the borrower. This stage is also time to register the home loan—that is acceptance of the terms and conditions of the home loan;
the signing of the loan agreement documents, thereafter the disbursement of the home loan in accordance with the terms agreed upon and mentioned in the sale agreement—not forgetting to mention the amount of the down-payment deposited by the borrower and given assent to by the lender.
The process of applying for a home loan has been simplified in recent times, which has led to an increase in home loan applications to take advantage of the housing loan interest rate. Home loans are the mainstay of commercial banks everywhere.
That being said, except for the very rich and financially sound, including those holding land, not everybody has the means to become a homeowner. Such people, who are in the millions, if not in the billions, must apply for a home loan if they have their dream to become a homeowner.