Step-by-Step Guide for Home Loans in India

The banks and lending institutions in India provide funds and finances for buying property or home to the borrowers called as home loans in India. If a person has not applied for the same before then, the process can be really exhausting and daunting at the same time. To avoid any unpleasant experiences, one must follow the below given step-by-step guide for home loan process in India. From making an application for home loan to getting the disbursal of the loan amount, there are so many stages and levels involved, which are as follows-

  1. Application form
  2. Personal Discussion
  3. Bank’s Field Investigation
  4. Credit appraisal by the and loan sanction
  5. Offer Letter
  6. Submission of legal documents and legal check
  7. Technical or Valuation check
  8. Valuation
  9. Registration of property
  10. Agreement signing
  11. Disbursement of loan amount

In the upcoming section we have discussed the above steps of process of home loans in India.

  1. Applying for a loan or filing application form: 

The very first step for applying for a loan is to fill in the application form. In the form the applicant has to fill in the personal details, professional information, details of property (applicant seeks to buy), details of the liabilities and financial assets, means of financing the property etc. The following documents are to be submitted along with the application form-

  • Identity proof
  • Address proof
  • Age proof
  • Income proof- salary slip or financial statements
  • Details of the employment or business
  • Bank statements
  1. Face to face or Personal discussion:

Once the application has been submitted by the applicant, the financial institution or the lender evaluates the application and documents thoroughly. Most of the lenders complete this evaluation process in about one or two days. But some banks or lenders might insist the applicant to meet the bank officials for a face to face discussion before sanctioning the amount of home loans in India, to gather more details and information about the applicant.

  1. Proper Field Investigation:

Every loan that a bank or lender sanctions is a risk or threat therefore, before providing home loans in India all the lenders complete a field investigation to confirm the information received by the applicant. A bank representative is sent to the applicant’s residential address or office address to validate the details. Once the details are validated, it helps in building a trust between the bank and the applicant.

  1. Credit appraisal and loan sanctioning by the bank:

This is a very crucial stage in the process of home loans in India. If the bank is satisfied by the details and documents provided by the applicant then the home loan is sanctioned by the lender. The lender usually establishes the repayment capacity of the person based on the age, income, qualification, employer, experience and nature of the business and works out the highest loan amount that an applicant is eligible for. The sanction letter contains the terms and conditions of the home loans in India, that the person is required to fulfill before the loan is disbursed.

  1. Sending an offer letter:

After the loan is sanctioned, the lender sends an offer letter to the applicant for the home loans in India. The offer letter contains the following details-

  • Type of loan: It is up to the applicant what to choose Fixed or Floating Home Loan
  • Amount of the home loan.
  • Interest rate
  • Whether the interest rate is fixed or variable
  • Loan tenure
  • Mode of repayment of loan
  • Special scheme under which the home loans in India has been provided (if any)
  • Terms and conditions related to the home loan
  • Any special conditions

The applicant has to make an acceptance by signing the offer letter, if they agree on the terms and conditions for the provided home loans in India.

  1. Submitting the legal documents and legal checks:

In the very next step, the bank and lending institutions demands for the legal documents related to the property or home that the borrower seeks to buy. The applicant is required to hand over the entire set of documents related to the property to the bank, which serves as a security for the provided home loans in India. These documents are kept under the custody of the bank till the whole loan amount is repaid.

It is the duty of the bank to check for the legality and authenticity of the documents. It is examined that whether the property is in any type of dispute or not.

  1. Technical and Valuation check:

Since home loans in India are a type of secured loan, therefore banks very carefully considers the property they want to finance. An expert either technical or a valuer is send to visit the property or premises that the applicant is intending to purchase.

  1. Valuation:

Home loans are just like loan against property but yet so different in various other terms. Property valuation is really important in the process of home loans in India. Housing loans have always been cheaper than other types of loans. There have been numerous times when the individuals, to obtain cheap loans have shown purchase of residential property or home at inflated prices from the related organizations. To avoid such risks, banks independently carry out valuation of the property for seeking the fair market price of the property. This is done for ensuring that the funds are released for the right purpose.

  1. Registration of property:

Once the valuation process is completed for the home loans in India and the documents drafted thereafter are cleared, signed and finalized by a lawyer, the property needs to be registered and stamps are to be put on the documents accurately.

  1. Signing the agreement of home loan:

Each and every borrower availing home loans in India is required to sign the home loan agreement provided by the bank. This is to ensure that they accept the terms and conditions of the bank or the lender. It also means that the applicant is giving authority to the bank over the property, which can be used to recoup the loan amount in case the applicant is unable to repay.

  1. Disbursement of loan amount or funds:

Once all the procedure of the home loans in India is completed by the applicant as well as the bank, it is time for the bank to release or disburse the funds in the favor of the applicant. Funds can be provided either in part-disbursement or in full disbursement either through cheque or demand draft.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.