Home Loan Process: Something That Is Worth The Wait
Knowing the facts about home loan process keeps you well prepared for all the challenges to come while getting a home loan. If you are well-prepared with documentation, it is pretty easy to navigate through the home loan procedure. The idea of buying a new house is always exciting, but going through the home loan process can be overwhelming unless you prepare well for the paperwork involved. Before you start your home loan process, you must be clear about the choice of your prospective lender, how much money you need, and your eligibility. Best home loan tip here is to do your homework, keeping in mind that you are making a financial commitment you will have to live with for years or maybe decades.
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An exhaustive online search can lead you to a lender who can offer you the interest rate, loan amount and repayment terms you want. Use online home loan calculators to know how much you can borrow and what your monthly repayments would be. It is also a good idea to collect the documents needed for your loan approval before applying for it. The lender may ask you for information and documents related to your identity proof, income and expenditure, credit history and the property you want to buy.
Once you have clarity about your financial situation and goals and have all documents in place, it is time to apply for a home loan.
How to Take a Home Loan?
Here are home loan tips and the critical steps involved in the procedure.
01. Check Eligibility
First and foremost, thing to do is to check your eligibility for getting a loan. There is no fixed or common eligibility criteria for getting a loan, it differs from bank to bank and person to person. So, inquire about it thoroughly see if you match their eligibility criteria of the respective bank or lender. If not go for another bank or lender that suits you. One of the most important factors here is your credit score. Credit score is a number that assures bank or lender your credit worthiness and that you are capable to repay the loan amount.
02. Apply for a Home Loan
The first formal step in the direction of financing your house is filling in the loan application. The application will have information such as your name, age, residential and office addresses, income, educational qualifications, current employment status, employment history, and details about the property you want the lender to finance.
03. Document Submission
After filling in the application, you need to submit documents supporting the information provided by you. Either you give the documents, or the lender will send a representative to collect them.
04. Processing Fee
After the lender takes up your housing loan application, you are required to pay a processing fee. It is a one-time charge meant to cover the costs incurred by the lender in handling the documents and processing the application. You must pay the processing charge at the earliest to take your application forward. The processing fee differs from lender to lender. Some banks or home finance companies sometimes reduce or waive processing charges to attract prospective home buyers.
05. Interaction with Lender
The bank or the housing finance company offering you a loan usually calls you for a meeting, either face to face or over the phone. It would help if you used this opportunity to tell the lender what your preferences are and how far the lender can meet them. The lender may discuss your current income and plan to repay the loan if sanctioned and what financial resources you have.
06. Document Verification
Scrutiny of documents is another crucial stage in your home loan application. The loan provider will match your claims with the documents submitted by you and make necessary inquiries from your employer or workplace. If you are self-employed, the lender’s representatives may visit your factory or office. The lender will also check your credit report and credit score to assess if it can trust you to repay the loan. Here it is a make-or-break stage, and if your prospective lender is not sure of your creditworthiness, your loan application risks rejection.
07. Loan Offer
If you pass the creditworthiness test and meet other conditions, the lender will send you a provisional letter of approval. The letter will usually have details such as loan amount sanctioned, rate of interest, type of interest rate (fixed or variable), equated monthly installment and repayment tenure. It also mentions terms and conditions. A borrower must go through the details carefully and contact the lender if anything needs to be changed. Your application will move ahead only after you accept the offer.
08. Legal and Technical Check
Before the lender finally disburses the loan, it will run legal and technical checks on the property. The legal review ensures that the property title is clear and that there are no other legal hassles. The legal experts appointed by the lender examine all the documents, including title deeds, related to the property. The technical experts inspect the property to assess that it is worth as much as the sale price. The experts examine the physical condition of the property, study building specifications and evaluate its value.
09. Signing Loan Agreement
The next step is to sign the loan agreement that details the terms and conditions of the loan. It contains the rights and obligations of a homebuyer and, as such, is the most important legal document in the housing loan procedure.
Disbursement is the final stage in the housing loan procedure, bringing cheers and satisfaction to the homebuyer. The homebuyer is usually required to pay the first installment of the loan on a specific date the month after the disbursement. The lender will formally notify you of the exact date, and it is a good practice to keep funds ready, after all, it is your first installment. Remember the first impression is usually the last impression.
Buying a property is a milestone in any individual’s life. Though depending on a loan to fulfill the dream of purchasing a property looks comforting in the beginning, for many it becomes a burden in the long run. Make a calculated and wise decision, so that repayment of the loan does not become your only priority in life. Hope this article has helped you understand the home loan process in simple terms and you are now in a better position to make a decision on how to take a home loan as well as handle this financial commitment.
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