Process Of Applying For A Home Loan In India

Some people may find getting a home loan difficult, as it requires complex documentation, eligibility, and verifications — even though it is not sure that you would qualify to get a home loan. Banks are also aware of their money, as recently, many disputes have been in the news about people getting a home loan and not repaying it and then flying away by selling it with the help of fraudsters.

This is why banks have modified the prerequisites, and now you need to have done proper documentation to get a home loan in India; the bank will also assess your personal competence, job or business, and other properties to assess if you can repay it in the future.

In this blog, we will clarify all the important steps that you can take to secure a home loan in India for your desired property without going through the hassle of documentation.

Important things to remember before getting a home loan

Have A Check On Your Capacity 

Never go for a home loan blindly. First, assess everything from your—salary, expenses, any other ongoing EMIs, Job security, if in business (profit potentials in future), and then other miscellaneous expenses. Because you never know what's going to happen in the future or when you will have a financial crisis, evaluate everything. 

Be ready for any financial crisis.

Remember to keep your combined expenses, including EMIs, within 70 percent of your total income. Don't throw everything in EMIs and expenses. Your savings will keep you strong if you get into any financial trouble in the future.

Try to avoid Non-Banking Financial Institutions (NBFC)

There is huge search volume in google for a keyword “home loan nbfc list.” Try to avoid NBFCs for high-value loans. They will offer you offers like "get home loan in 5 minutes," and you will fall into the trap of dramatically higher interest rates and processing fees. These NBFCs first provide loans to you and then make their documents complex in nature, so you can't find out their real interest rates. 

Their interest rates go upto 30 percent sometimes, and if you don't pay or try to cancel the loan, they will harass you; such incidents have occurred thousands of times recently. So, I always advise you not to take loans from NBFCs and to rely on banking institutions, even if it gets hard to get a loan from them.

Step-by-Step Guide to Home Loan Application Process

Getting a home loan can seem like a long process, but with some understanding of the steps, it becomes easier. Here's how the entire process works, broken down in simple terms.

Fill the Loan Application Form & Attach Documents

The first step in getting a home loan is filling out the loan application form. This form will ask for basic personal details like:

       •  Your name, phone number, and address
       •  Your monthly or yearly income
       •  Your job details, including employer info
       •  Property details (if you've chosen one yet)
       •  The cost of the property you're buying

After filling out the form, you'll need to submit some important documents, like:

       •  Proof of income (like pay stubs)
       •  Identity proof (Aadhar card, passport)
       •  Address proof (like utility bills)
       •  Employment and education details
       •  Bank statements and property details

Pay the Processing Fee

Once you've submitted the form and documents, you need to pay a processing fee. The bank charges this fee to handle your loan application.

       •  It's usually between 0.25% to 0.50% of the loan amount
       •  For example, if the loan is 15 lakh, the fee might be 3,750 to 7,500
       •  Some banks may offer zero-fee loans, but they might increase other 
       •  charges, like interest rates

Discussion With the Bank

After your application and documents are submitted, the bank will review them. Sometimes, the bank may ask you to visit for a meeting to clarify some details and discuss your repayment ability.

Valuation of the Documents

The bank will check if all your documents are real and correct. This is very important because submitting fake documents can cause serious problems. A bank representative may visit your home or workplace to verify your details.

The Sanction/Approval Process

Once the documents are checked, the bank will decide whether to approve your loan. The bank will look at:

       •  Your income, job, and education
       •  Your bank transactions
       •  Your ability to repay the loan

If everything is good, the loan will be approved. You'll receive an official sanction letter stating the loan amount you've been approved for.

Processing the Offer Letter

After approval, the bank will send you an offer letter that includes:

       •  The loan amount
       •  The interest rate (fixed or variable)
       •  Loan repayment details
       •  Terms and conditions

You need to carefully read and sign this offer letter, agreeing to the terms mentioned.

Processing the Property Papers Followed By A Legal Check

After you accept the offer, you must submit all original property papers to the bank. These papers stay with the bank as security for the loan. The bank will check these papers carefully with the help of a lawyer to make sure everything is legal.

Processing A Technical Check & Site Estimation

The bank will send a property expert to inspect the home you're buying. This is to check:

       •  The condition of the property
       •  Whether the construction is up to standard
       •  The property's value

If everything looks good, the loan process moves forward.

The Final Loan Deal

After the property inspection, the bank will finalize the deal. The loan documents will be prepared, and you'll be asked to sign them. This step officially seals the agreement.

Signing the Loan Agreement

At this stage, you'll sign the home loan agreement. You may also have to give post-dated cheques for the first few months of repayment. The bank will keep the original property papers until the loan is fully paid.

The Loan Disbursal

Once everything is signed and the documents are clear, the loan will be given to you. The bank will issue a cheque, which is usually paid directly to the property seller or builder.

Key Points to Remember:

       •  Always compare home loan options
       •  Keep documents ready and organized
       •  Never submit fake documents
       •  Read all loan papers carefully
       •  Interest rates can be negotiated
       •  Processing fees and extra charges apply
       •  Original property papers stay with the bank

If all the documents are in order, this entire process usually takes around two weeks. By following these steps, you can successfully apply for a home loan and purchase your dream home.

Do we get a 100% home loan in India?

When applying for a home loan, the RBI (Reserve Bank of India) has set rules about how much a lender can approve based on the value of the property you're buying. These rules are called the LTV (Loan-to-Value) ratio. The LTV ratio tells you the maximum loan amount you can get as a percentage of the property value.

For a home loan up to 30 lakhs, the bank can approve a loan up to 90% of the property's value. This means if the property is worth 33.33 lakhs, you can get a loan of 30 lakhs. If the loan amount is between 30 lakhs and 70 lakhs, the LTV ratio reduces to 80%. So, for a property worth 93.75 lakhs, you can get a loan of 70 lakhs.

For loans above 75 lakhs, the LTV ratio is 75%. This means if the property is worth more than 93.75 lakhs, you can get a loan of up to 75% of the property value. Keep in mind that the final loan amount depends on other factors, like your monthly income, credit score, and the location of the property. It's also important that you have all the proper documents for the property.

Home loan interest rate in India

Interest rates in India depend on bank to bank and can vary according to their rates. But on an average, the most popular banks in India keep their interest rates as in the following values:

       •  ICICI Bank: Rates vary by loan and borrower type.
       •  PNB Housing Finance: Rates range from 8.50% to 14.50%.
       •  Repco Home Finance: Rates start at 9.60%.
       •  Indiabulls Housing Finance: Rates start at 8.75%.
       •  L&T Housing Finance: Rates start at 8.60%.
       •  Bank of India: Rates start at 8.35%.
       •  State Bank of India: Rates start at 8.50%.
       •  HDFC Home Loans: Rates start at 8.75%.
       •  LIC Housing Finance: Rates start at 8.50%.
       •  Bajaj Finserv: Salaried: 8.50%–15.00%, Self-employed: 9.10%–15.00%.
       •  SBI Tribal Plus: Rates start at 9.25%.
       •  Baroda Home Loan: Rates range from 10.15% to 11.60%

You can also refer to the Home Loan EMI calculator for different banks to calculate the overall value of your home.

In summary, taking out a loan can be easier if you go through a systematic process and follow all the steps mentioned above to take out a home loan in India. Also, loans from banking institutions are always advised to be safe from all potential frauds.

To calculate interest rates, you can go through the home loan calculator of different banks you want to take a loan from, and you can also know their interest rates on their websites. For any further discussion regarding property investment and loans, call 7053707070.