The home loan market has been growing at a CAGR of 15% per annum and the growth is likely to increase in the coming years. These days, most buyers avail of a home loan to fund real estate purchase. Home loans allow borrowers to fulfil their dream of becoming homeowners without worrying too much about saving enough money to cover the entire cost of a home. When borrowers avail of a home loan, they are required to pay only down payment, i.e. a small percentage of the property’s total value they plan to buy with the home loan. The remaining amount is paid by the lender. The borrower repays the lender over a stipulated period known as loan tenor in the form of EMIs or Equated Monthly Instalments. Lenders charge interest on the principal amount for the service rendered.
If you are planning to apply for a home loan, familiarizing yourself with the home loan application process will help you bypass hiccups and experience a smooth and hassle-free home loan process. This article focuses on apprising its readers about the various steps involved in the home loan procedure.
Home Loan Procedure: Step-by-Step Guide
1. Do Your Research and Finalize Your Lender
If you are planning to avail a home loan, the first thing you must do is do your research and figure out which lender would be the right choice for them. Finalizing the right lender would require you to talk to different lenders, negotiate with them regarding the home loan interest rate they are willing to offer you as well as other loan terms and conditions, such as the size of the loan sanction and the repayment tenor. Borrowers should go with the lender offering the lowest home loan interest rates but other factors, such as the lender’s reputation and experience, must also be taken into account.
2. Make an Application
Once you have decided on your home loan lender, the next step would be to apply for a home loan. Borrowers can avail a home loan online as well as offline. Before beginning the home loan application process, check your housing loan eligibility. Apply only if you meet your lender’s eligibility requirements; inability to meet the qualifying criteria will lead to your application getting rejected and your credit score taking a hit. Further, before initiating the home loan procedure, go through the list of documents you will need while applying for a home loan. Keep these documents ready with you to experience a smooth application process.
3. Pay the Processing Fee
While submitting the home loan application form, you will be asked to pay a home loan processing fee. This fee varies from lender to lender and borrowers can negotiate with their lender and ask them to reduce the home loan processing fee. In general, the home loan processing fee varies between .25% to .50% of the home loan amount. Please note that the home loan processing fee is non-refundable. Lenders use this fee to maintain your loan account and take care of the various costs associated with it.
4. Wait to Hear from Your Lender
After your lender has recieved your loan application, they will take a day or two to get back to you. If they approve of your loan application, they will extend you a loan offer or sanction you a loan. Your lender will assess your loan application based on the following factors before they take a decision on it: age and income of the applicant, income and employment details, credit score, etc. If your lender approves your loan application, they will get in touch with you to carry out a formal discussion regarding the loan terms and conditions to be extended to you.
5. Receive the Sanction Letter
After you have a discussion with your lender and both of you agree to go ahead with the home loan, your lender will design a home loan sanction letter. This letter will contain details, such as the home loan amount they are willing to offer you, the rate of interest they are planning on offering you, the type of interest rate regime they are offering you and the loan tenor. If you agree with the terms and conditions mentioned in the document, send a signed copy of the sanction letter to your lender. If you are not happy with the loan terms and conditions, another round of negotiations will ensue.
6. Submit the Property Documents
After you have signed the home loan sanction letter, your lender will require you to submit all property-related documents. You can find the list of documents you will need to submit during this stage of the home loan process on your lender’ website. After you have submitted all the documents, your lender will carry out technical and legal verification of the property you wish to buy with the loan money. If your lender is happy with the property you are buying and it passes all their checks, they will release the final loan agreement.
7. Sign the Final Loan Agreement and Wait for Loan Disbursal
After everything has been finalized, the final step would be to sign the loan agreement. To sign the loan agreement, you will have to go to your lender’s office. This step of the process cannot be carried out online. For this step, you will have to visit your lender’s office. After you have signed the final loan agreement, your lender will disburse the loan amount into your account. This will take a few days, so be patient.
Final Words
The home loan application process is simple and easy to navigate if you are well prepared. If you are planning to avail of a home loan any time soon, other than negotiating for the lowest home loan interest rates, borrowers must also negotiate for a suitable home loan tenor and a sizeable loan sanction. Further, they should try their best to choose a lender who they can trust and rely on.