Owning a home gives a feeling of stability in life. However, with the steep rising prices of property in India, buying a house at a go is not a very easy task. However, this process has been made considerably easy by the home loans being granted by the umpteen numbers of Housing Finance companies and nationalized and private banks in the country. Thanks to swelling competition in the housing loan industry, the home loan process in India has become significantly streamlined. Despite shaking off the tag of a long and tedious documentation process, the housing loan procedure still requires one to go through certain mandatory stages. Read on to explore the basics of the home loan process in India.
Home Loan Procedure In India
Submission Of Application Form
After choosing a particular home loan, the customer submits the application form to the housing finance company (HFC) along with other relevant documents as required by the HFC. They comprise documents to establish income, age, residence, employment, investments, etc. The customer also needs to hand over a cheque for payment of an up front (non -refundable) processing fee of about 0.5-1% of the loan amount to the HFC.
Validation Of The Information
In the next stage, HFCs validate the information provided by the customer on the application form. They usually conduct checks on the residential address of the customer, the place of employment of the customer, and credentials of the employer. Some HFCs may insist on a personal interview with the customer and perform a reference check on the references provided by the customer on the application form.
Issue Of Sanction Letter
After due appraisal of customer profile, a sanction letter is issued which contains details such as loan amount, rate of interest, annual / monthly reducing balance, tenor of the loan, mode of repayment and general terms and conditions of the loan. This is the actually the approval of the money lending procedure by the company. However, the money is sanctioned only after the documents and the property on behalf of which the loan is being granted is thoroughly verified.
Submission Of Documents
Once the sanction letter is passed, the customer is required to leave the entire set of original documents pertaining to the property being purchased with the HFC as security for the loan amount sanctioned. These documents remain in the custody of the HFC till the time the loan is fully repaid. Once the documents are handed over to the HFC, they send all the documents for a thorough legal scrutiny.
Validation Of Property
Prior to disbursement, the HFC also conducts a site visit to the customer's property to ensure that all construction norms have been adhered to properly. Once the HFC is satisfied that the property is legally and technically clear, they disburse the loan amount. The disbursement from the HFI is on the basis of the stage of construction of the property.
Once all the above mentioned process, the borrower is entitled to take the money from the lender party. Until such time that the entire sanctioned amount is not drawn, the customer is supposed to pay a simple interest on the Actual Amount drawn (without any principal repayments). The EMI payments commences only after the entire sanctioned loan amount is drawn.