Buying a house is a milestone for most people in their 30s – and with home loans, achieving this dream is easier. Banks and financial institutions offer huge loan amounts at reasonable interest rates for up to 30 years, depending on home loan eligibility criteria. However, the loan application process is quite simple yet detailed. If you too wish to apply for housing loan in India, you should be well-versed with the application process. Read on to know how you can get a home loan in India in easy steps.
Steps to Apply for Housing Loan in India
The home loan verification process involves several steps but digitalization and the online presence of lenders have made it quicker and easier. Here is a step-by-step guide on how to apply for housing loan in India.
Step 1: Filling in the Application Form
The first step in applying for a home loan is filling out the application form. It is the most essential document wherein one must enter all your personal details – name, contact number, address, occupation, income etc. The borrower will also need to provide details related to the property, estimated cost, and the deposit amount in the application form along with substantial proof of their income, address, bank statements and so on.
Step 2: Document Submission
The next step involves submitting the relevant documents for verification. The documents that need to be submitted at this stage include the following –
- Any of these KYC documents for ID proof – Aadhaar card/PAN card/Voter’s ID/Passport/Driver’s license
- Employee ID card
- Documents related to the property
- Bank account statements for the last 3 months (salaried borrowers) and 6 months (self-employed borrowers)
- Salary slips for the last 2 months
- Document showing proof of business over the last 5 years (businessmen/self-employed borrowers)
Document submission is an essential aspect of the housing loan verification process and it may take up to 2-3 days for the lender’s representative to verify the documents.
Step 3: Document Verification
In the next stage, the lender will verify the submitted documents and run a quick background check on the borrower’s profile. Earlier, this required the borrower to visit the nearest branch of the lender for a face-to-face interview but today, the entire process can be conducted with a representative coming to your doorstep for verification.
Step 4: Paying the Processing Fee
The next step involves paying the processing fee for a housing loan. Banks and lending institutions charge a non-refundable, nominal fee between 0.5% and 1% of the loan amount. The fee amount is used for initiating and processing the loan. Some lenders even offer a waiver on loan processing to attract borrowers. Therefore, it is important to negotiate the policy terms with the lender before making the payment.
Step 5: Evaluating Repayment Capacity
One important aspect of the housing loan application process is verifying the repayment capacity of the borrower. The lender’s decision to sanction or reject the application depends on the borrower’s ability to repay the loan amount with the interest payable on time. If the financial institution issues a conditional sanction, the borrower will need to ensure that all the stipulated conditions are satisfied before the disbursal of the home loan.
Step 6: Processing of the Property Documents
Once the sanction letter is approved, the borrower must submit the property documents to be kept with the lender till the full amount is repaid. The original property documents to be submitted typically include the Sales Agreement, NOC, title deed etc. The lender verifies these documents thoroughly before approving the home loan application.
Step 7: Obtaining the Credit Report
One of the important steps in the home loan application process is obtaining a credit report. This has become easier ever since the Reserve Bank of India mandated the credit bureaus to provide an annual report to the customers. The lender looks for a CIBIL score for home loan to evaluate the borrower’s overall creditworthiness. On a scale of 300 to 900, a score of 750+ is usually considered ideal for easy home loan approvals.
Step 8: Disbursal of Loan
The final stage of the loan application involves the disbursal of the amount. At this stage, the borrower has to go through the terms and conditions stated by the lender and sign the dotted line after acknowledging all the clauses. Once that is done, it takes about 3-4 working days for the loan amount to get transferred to the borrower’s account.
Using an Online Home Loan Calculator
With the use of an online home loan calculator, it is now easier to assess the monthly EMIs before you apply for housing loan in India. The tool is available free of cost on the lender’s website. It is designed in a way wherein the borrower only has to input the values viz. the principal amount, the chosen interest rate on home loan, and the repayment tenor – and the calculator shows an estimate of the Equated Monthly Installments (EMIs) to be paid every month. The best part of using the online home loan calculator is that borrowers can rest assured of the results being 100% accurate. This is because the tool works on a mathematical formula –
EMI = [P x r x (1+r)^n]/[(1+r)^n-1] where,
P = principal
r = rate of interest
n = tenor
Since the results are automated, there is no room for human errors or miscalculations. Besides, there is no limitation on the end-usage, so borrowers can assess the home loan EMI as many times as they want by trying out multiple combinations.
Home loans are a great way to safeguard one’s years of savings and yet reap the benefits. With most lenders offering minimal documentation and faster disbursals, it has now become easier to obtain a loan. Those who want to apply for house loan in India must go through the pointers explained above. Most importantly, borrowers should check the home loan eligibility criteria set by the financial institution and reach out to the lender to have their queries addressed before signing on the dotted line.