7-Step Guide for Getting a Housing Loan in India

Applying for a home loan is an exciting first step toward owning your dream house. With this step-by-step guide to the house loan process in India, you won’t feel overwhelmed when you do make a home loan application. While there may be slight variances amongst lenders and their home loan eligibility criteria, the overall approach outlined here will remain more or less the same for all lenders. Following these steps will ensure a smooth and stress-free home loan application process.

Continue reading to learn more about the home loan process, and your loan eligibility and re-payment requirements.

Step 1: Applying for a home loan

A formal application to the bank is the first step in the home loan process. You must provide your personal information for the bank to investigate all your submitted documents and evaluate your loan eligibility. The following documents are generally requested by most banks:

• Identity proof documents
• Address Proof documents
• Age proof documents
• Proof of educational/ professional qualification
• Employment detail documents
• Bank statements
• Proof of income documents
• Pan Card
• Property details (in case your lender agrees to sanction your home loan)

Step 2: Payment of Loan Processing Fees

Your bank can charge you a non-refundable loan processing fee. Processing fees commonly vary from 0.5 per cent to 1% of the loan amount. Banks use this amount to start and maintain the home loan process.

Several banks have recently initiated eliminating loan-processing fees in order to attract more borrowers. You could try to negotiate with your bank to gain the benefit. However, not all 

banks will be willing to waive processing fees.

Step 3: Verification

After you have submitted your application and processing fees, the bank will analyse it and determine the amount you are eligible for.

For them to be able to examine your re-payment capabilities, you might be asked to meet bank officials directly, generally within two to three working days of making your application.

Following the personal encounter, the bank will review all of the information and credentials you provided in your loan application. So, make sure you know how to verify your CIBIL score, which should be more than 725. The bank will send representatives to your business place and home to check the information you have submitted in your form.

Step 4: Evaluation of Re-payment Capacity

The most important step in the home loan process is establishing the borrower’s ability to pay back the loan. Your home loan application may be approved or denied depending on the bank’s evaluation of your repayment ability of the loan (the principal plus interest) on time.

If the bank issues a conditional sanction, the borrower must comply with all of the terms before the loan can be granted.

Step 5: Home Loan Offer Letter

At this point, the bank produces an offer letter that includes information, such as:

• Sanctioned amount
• Rate of interest
• Fixed or floating rate of interest
• Loan tenor
• Re-payment mode
• Special scheme (if applicable)
• Terms and conditions of the loan

If the contents (terms and conditions of the lender) of the offer letter are acceptable to you, then you must submit a signed copy of acceptance to the bank. The bank saves an acceptance copy because it is effectively a duplicate of the offer letter. At this point, the bank’s administrative fees (if any) must be paid.

Step 6: Property Verification

The bank will check the property in question before disbursing the loan. Original copies of the title deed, no objection certificate, and any other papers requested by the bank will be required during this step.

The property will then be subjected to a legal review to ensure that the title is clear and there are no disputes. The bank will also undertake a technical valuation of your property. If it is an under-construction property, the bank will examine the project’s location, stage, quality, and progress, among other factors, and appraise the property using defined criteria.

When a property is ready to sell or resale, the bank considers its age, ownership, construction quality, upkeep, location, and legal clearances. Bank-hired property valuators examine the property’s worth against a set of criteria before determining the loan amount.

Step 7: Home Loan Disbursal

The registration process for the house loan begins once all the formalities have been duly completed. The legal documents are printed on stamp papers with the requisite denominations in a manner approved by the bank’s lawyer. Following that, you must produce post-dated checks for the agreed-upon time and sign the house loan agreement.

After you sign the loan agreement, the procedure of disbursing your house loan will begin. Your bank will disburse the loan amount based on the method of disbursement agreed upon (lump-sum or in phases).

Summing Up

Please keep in mind that your house loan is a secured loan — it uses your property as collateral. Your chosen lender will thoroughly verify all property papers, so giving false information is futile.

It is always beneficial to check with a few banks and choose the one which provides the lowest interest rate on a home loan. Make an educated decision before applying for a home loan, you should thoroughly understand the home loan process and the subsequent re-payment commitments (using a Home Loan EMI Calculator). Always keep track of the market for special offers and waivers that banks may offer from time to time to grab the attention of the borrowers.

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