9 Essential Steps for a Successful Home Loan Application

A home loan provides the financial assistance needed to purchase a house, offering manageable monthly instalments and flexible repayment terms tailored to individual needs. It's the cornerstone for fulfilling the cherished goal of homeownership.

However, navigating the home loan application process can be daunting, with potential pitfalls that could delay approval or disbursal. This comprehensive guide presents 9 essential steps to streamline your home loan journey. Let this article be your roadmap to realising your dream of homeownership with confidence and clarity.

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1. Completing the Home Loan Application Form:

Once you've selected the lender for your home loan, the initial step towards securing your Home Loan involves filling out the application form. With numerous banks and Housing Finance Companies (HFCs) offering convenient online application options, this process has become notably streamlined and user-friendly.

You can either visit the nearest branch of the lender or access their official website to initiate the application process. The application form necessitates various personal details, such as your name, address, contact information, educational qualifications, income details, employment history, and other relevant particulars.

Additionally, you'll be required to furnish essential documents as evidence, such as proof of identity, address, and employment, along with recent salary slips or income tax returns for the preceding two years if you're self-employed.

2. Settling the Processing Fee:

Upon submitting your Home Loan application, banks and HFCs levy a processing fee to cover preliminary tasks like document verification and property assessment, pivotal aspects influencing the loan approval process.

However, it's crucial to note that payment of the processing fee does not guarantee loan approval. Moreover, the processing fee is non-refundable regardless of the loan outcome-approval or rejection.

Some lenders may demand a portion of the processing fee upfront, with the remainder payable upon loan approval. The exact processing fee amount varies among lenders; while some calculate it as a percentage of the loan amount, others apply a flat fee, irrespective of the loan size.

3. Bank Discussion:

After submitting your application form and fulfilling all required documentation, the bank may arrange for a personal meeting or a phone conversation with the applicant. This interaction is intended to gather supplementary details about you and ascertain your capacity to repay the loan.

Face-to-face interactions are especially preferred for business owners, aiding the lender in comprehending the nuances of your entrepreneurial endeavours.

4. Assessing Eligibility:

Following these discussions, the lender scrutinises various aspects of your eligibility, such as your income, financial obligations, credit history, and other relevant factors. For business owners, the stability of cash flow and the sustainability of the enterprise are also critical factors considered to influence repayment capacity.

5. Document Validation:

Document verification stands as a pivotal stage in the Home Loan application journey. Banks and HFCs meticulously verify all the submitted documents, often reaching out to your employer to confirm your employment status.

Additionally, they conduct thorough address verification, either by visiting your residential or workplace address if not completed during previous interactions. If any documents are yet to be submitted, you'll typically receive a specified timeframe to furnish them; failure to comply may lead to application rejection.

Furthermore, any disparities or discrepancies detected during the verification process, such as falsified information or fraudulent activity, can result in the rejection of your loan application.

6. Loan Approval Procedure:

Upon completion of the eligibility assessment and document verification, the lender decides whether to approve your loan application, adhering to their established credit policies. Subsequently, you'll be promptly notified of the decision.

7. Property Validation:

After the loan is approved, the lender proceeds to verify the property earmarked for purchase. This legal scrutiny ensures the property's clear title, free from any encumbrances or legal disputes. If the property selection is ongoing, you may request an extension to complete this step.

For properties currently under construction, the lender assesses the progress and construction quality, while for resale properties, factors such as age, structural integrity, and maintenance are evaluated.

Once a property has been selected or finalised, it is essential to furnish all original property documents to the bank. These documents serve as collateral for the home loan, and the bank retains them until the loan is fully repaid.

The original property papers typically comprise the following:

• Identity and address proofs of the seller

• Details of the property, including its name and address

• Written documentation if the seller is not the primary owner

• A No Objection Certificate (NOC) from the primary legal owner

• NOCs from the statutory development board representative and the cooperative housing society

• If the land is leased, a NOC from the lessor

These original property papers remain in the possession of the bank until the home loan is completely repaid. Following the submission of these documents, the bank conducts meticulous legal verification, which includes verifying the sale documents between the applicant and the seller.

Subsequently, the original documents are forwarded to the bank's legal counsel for a thorough review. Approval by the lawyer signifies that all submitted documents are clear and authentic, thereby facilitating the smooth processing of the home loan. You may be asked to provide additional documents for further verification if any discrepancies are identified.

8. Receipt of Sanction Letter:

You'll enter into a loan agreement with the lender upon clearing all remaining formalities. At this juncture, you'll need to surrender all original property-related documents to the lender, which are held as collateral until full repayment of the loan.

The sanction letter will be provided for your review, encompassing comprehensive loan terms and conditions such as loan amount, interest rate, tenure, repayment modes, and other pertinent clauses. Upon thorough examination, you're required to signify your acceptance with your signature on the agreement, thus formalising the loan agreement.

9. Loan Disbursement:

Upon the completion of the loan agreement signing and the submission of all outstanding documents, the lender proceeds to disburse the loan amount. If you're purchasing a property from a builder, you'll typically receive a cheque made out in favour of the builder.

In case your Home Loan is obtained from a bank where you maintain a Savings Account, the Equated Monthly Instalments (EMIs) will be automatically deducted from your account through a standing instruction.

However, if your Home Loan is sourced from a different bank or a Housing Finance Company (HFC), the EMIs will be deducted from the bank account registered for NACH (National Automated Clearing House), a centralised payment solution. This ensures a seamless and hassle-free repayment process.

To conclude:

The Home Loan application process explained above is standard across various banks and Housing Finance Companies, although slight variations may exist depending on the specific lender's policies and the borrower's individual profile.

Before initiating the Home Loan application, you must exercise prudent judgment in selecting the lender and gain a comprehensive understanding of the loan process. Prompt submission of any pending documents or fulfilment of formalities post-sanction is crucial to avoid incurring interest charges from the date of loan sanction.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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