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Property buying guide buying a property with a home loan

Property buying guide buying a property with a home loan

Buying a house is a big decision and a significant financial decision. Some people keep postponing the decision as they think they will buy it at the right time while the real estate market is unpredictable, and the value of the property is soaring high. Today millions of people dream of buying the dream house. A lot of people are not well acquainted with the procedures and process of home loans. Here is the complete guide for you for buying the dream property with a home loan.

Check the eligibility for a home loan.

Before you apply for the home, you should know whether you are eligible for a home loan. Determine your loan eligibility, which depends on your repaying capacity. The bank can ask for your payment details, fixed deposit, and expenses to know your repayment capacity. The repayment capacity is ideally based on surplus income, spouse's assets, expenses, and income stability.

A healthy credit score that is 750 or above can impact the interest rates offered to you. This background check is done by the bank that includes past loan repayment history, credit dues, existing loans, and debt borrowed in the past. The bank ensures that you are eligible to repay the loan in a given time. Generally, 50% of your income is available for repayment of the loan. The tenure and rate of interest are based on the amount of the loan.

Apply for a home loan

Once you are eligible for the home loan, you can apply for the amount you want. With a formal application, you can apply in the bank. In addition to the formal application, you have to give personal information so the bank can proceed with the process. Here are some of the personal documents that you need to submit to the bank.

  • Address proof
  • Identity proof
  • Age proof
  • Bank statements
  • PAN card
  • Proof of educational qualification
  • Income proof
  • Employment details
  • Once the loan is finalized, then you have to submit property details.

What is the maximum amount that anyone can borrow?

The bank lends 80-85% of the total cost of the property. For say, the property is of 60lakhs; then almost 48lakhs bank can lend you for the property purchase. There is an amount that needs to be paid as a down payment. The bank will lend you the payment that is required after you have paid the down payment.

You can even lend a lesser amount depending upon your need. The loan depends on the property you are purchasing and the location of the property. The bank even analyzes the property you are investing in to check whether it is on the dispute or not.

Loan processing payment

The bank charges you a refundable or non-refundable amount as loan processing fees. The banks can charge from 0.5% to 1% of your loan as processing fees. However, some banks waive the processing fees to attract customers. The banks follow a systemic approach in the processing of the loan. You can talk to the people in the bank who are involved in the loan processing process. Not all banks are open to waiving off the fees, so it would be better to talk to the officials and consult the bank employees.

Is a co-applicant necessary for taking a home loan?

Yes, a co-owner is mandatory for taking a home loan. If the property you are purchasing is co-owned by another person, they should also apply for a home loan. If you are the sole owner of the house, then again, you should have a co-applicant for applying for the loan. The earning member of your family can be the co-owner for taking a loan. Bank can even ask for income details of at least three earning members, so the repaying of the loan is secured.

Offer letter of loan.

After the initial proceeding of the loan approval procedure, the bank will provide an offer letter that includes the following details.

  • The applicable rate of interest.
  • Loan tenure
  • Mode of repayment
  • Sanctioned amount.
  • Floating or fixed rate of interest
  • Terms and conditions of the approved loan

After approving the terms and conditions of the offer letter, you have to submit a signed copy to the bank. The signed copy is a duplicate copy that the bank keeps for the record.

Verification of the property

Before disbursing the loan amount, the bank verifies the property. In this process, you will be asked to submit original copies of the title deed, allotment letter, no objection certificate, and other documents requested by the bank.

Technical evaluation will take by bank authorities. If the house is under construction, then the bank will check the area of the property, progress of construction, quality, and the improving stage of construction. The bank will evaluate your property based on these parameters.

If the property is prepared and the house is resold, the bank evaluates the ownership, age of the property, quality of construction, and maintenance of the property. The bank evaluates the property before sanctioning the amount to the homeowner.

What is sanctioning and disbursement of loan?

Based on the property's verification and the documents provided by you, the bank decides whether the loan will be sanctioned. The bank will give you the loan offer letter after approving the loan.

The disbursement of the loan is the amount that is provided to the homeowner after the approval of the loan. This is when you can apply for a lesser amount against what is mentioned in the loan offer letter as the sanctioned amount. Disbursement of loan is done after the technical verification of the property based on the parameters. Here are some of the documents required for the disbursement of the loan.

  • Photocopies of the title deed.
  • Allotment letter
  • Encumbrance certificate

How will disbursement take place after approval?

After the formalities mentioned above and technicalities are completed, the registration procedure for the commencement of the loan takes place. In this process, the legal documents are made that have to be approved by the bank's lawyer on stamp paper. After this, the bank will give you the amount in installments in cheques as per agreed terms and conditions.

What is EMI?

When you repay the loan to the bank, you repay in EMI. EMI includes the principal amount with interest. Repayment of the loan in EMI starts in the following month, in which the full disbursement is given to you.

It is good to have an idea about the process of loan approval before applying for it. In this way, you can check a few banks and lenders' offices to get the lowest rate of interest.

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