A home loan is a sum of money borrowed from a financial institution or bank to purchase a home. Many housing finance companies, public banks, and private banks offer housing loans, which allow you to borrow money to buy a home and pay it back in monthly installments. Depending on the borrower’s needs, home loan interest rates can be fixed or floating, or partly fixed and partly floating. Certain tax benefits are also available on home loan under Section 80EE of the Income Tax Act. However, only first-time home buyers are eligible for the income tax deduction on home loan interest.
In India, obtaining a home loan entails several steps that, before the digitization of banking, were complicated for applicants. But now, with the online method, the home loan procedure is not only simple but also faster. In just a few days, your loan could be disbursed.
Here are the steps of the housing loan procedure.
Identity card (PAN Card, Aadhaar Card, Passport, Driving License, etc.)
Address proof (Aadhaar Card, Passport, Driving License, Utility Bills, etc.)
Age validation (Birth certificate, 10th certificate, Aadhaar Card, PAN Card, Passport, etc.)
Evidence of academic qualifications
Income proof ( Bank statements, ITR, etc.)
Business evidence (Balance sheet, Profit & loss statements, Business license, Proof of business address, etc.)
Documents about the period of mortgaged property ( an approved copy of the building plan, a letter of consent from the society/builder, and an estimate of the cost of construction)
Sanctioned loan amount
Applicable interest rate
Interest rate type – fixed or variable
Special plan (if applicable)
Your home loan's terms and conditions
Your mortgage's policies
Other details, such as your home loan policies, may also be included in the letter
After receiving the letter, sign and return the acceptance copy to the lender. The acceptance copy is a duplicate of the sanction letter kept by lending institutions for record-keeping.
The home loan transfer procedure assists customers in lowering their EMIs by transferring their outstanding balance from another financial institution to one that offers a low-interest rate.
Here are the steps that need to be followed for the home loan transfer procedure.
Procure all of the documents required to transfer the balance of your home loan from your current lender.
Acquire a consent letter from the current bank, as well as the outstanding loan amount.
Provide all documents to the new bank to which you want to transfer the balance of your mortgage.
The new lender will then pay off the balance owed to your old lender.
As a result, your old loan account will be closed, and all loan payments will have to be made to the new bank.
All property documents will then be handed over to the new bank, officially completing the home loan transfer process.
Here are a few important benefits of a home loan transfer procedure.
It enables you to receive great customer service.
It will lessen the burden of repayment, allowing you to pay off the loan in a shorter period.
Your new lender may be able to provide you with additional benefits such as easy prepayment, a top-up plan, and foreclosure at no additional cost.
Here is a step-by-step guide to a mortgage loan procedure.
Obtaining a pre-approval letter from a mortgage lender is the first step.
Based on your savings, credit, and income, a mortgage lender will approve you to borrow a certain amount of money.
Because the seller has solid evidence that you're qualified for a loan to purchase the home, having a pre-approval letter gives your offer a lot more clout.
A thorough home inspection reveals important information about the property that isn't visible on the surface.
Getting a home inspection is important because it informs the buyer if the house requires expensive repairs.
What is discovered during an inspection can be used in a sales negotiation between the buyer and the seller, as well as their real estate agents.
The loan processor begins by preparing your file for underwriting.
All necessary credit reports, as well as your title search and tax transcripts, are ordered at this time.
The information on the application is verified, including financial assets and payment backgrounds.
Any debt problems, such as delayed payment, will require a written explanation.
The file is sent to the underwriter once the processor has put together a complete package with all verifications and documentation.
During this time, the underwriter will thoroughly examine your information.
The three Cs (Capacity, Credit, and Collateral) of mortgage underwriting will be their primary focus.
A home loan is a way to purchase your dream house. You should research well about loans offered by different financial institutions. With this digital India, now obtaining a home loan and its whole procedure has become easy and hassle-free.
A full disbursement occurs when the bank transfers the entire amount at once. In the situation of under-construction property, the home loan disbursement is determined by the stage of construction of the residential property. The loan disbursement is complete in the case of ready/resale property. This means that the lender provides complete payment by cheque.
When a property is under construction, the loan is usually paid in installments, which is known as partial or part disbursement. The lender will not start the EMI right away if the loan is only partially disbursed. The repayment dues on pat disbursement may not be applicable at the beginning of the loan tenure because the EMI is calculated on the total loan amount.
Home loan prepayment is a service that allows you to repay your loan (in part or in full) before the end of your loan term if you have excess funds. If you choose to pay in advance, you have two choices:
Reduce the EMI amount while maintaining the same tenure
Reduce the term while maintaining the same EMI
A home loan sanction letter is an initial approval letter signed by a person of authority for a home loan applicant. The letter is issued following the verification of details such as credit history, income stability, repayment ability, and documents.
You must pay a fee to banks or NBFCs for them to process your home loan application. It is a one-time fee that is usually paid proactively. Some banks may refer to it as an administrative fee. The processing fee is usually charged only after your application has been approved.