Getting a Home Loan for building the dream home is the first step towards the journey. The applicants who are seeking loans for their dream home might be curious of what are the steps to get the loan. We bring the step-by-step process to apply for a Home Loan in banks or other agencies.
How to Apply For a Home Loan
Below is the step-by-step process for getting a home loan.
- Step 1: The first step is to fill out the Application Form for Loan and affix the dos with the form.
- Step 2: Submit the processing charges.
- Step 3: Have a meeting with the bank.
- Step 4: The bank will evaluate the documents.
- Step 5: You will be notified of the sanction of the loan or approval of the loan.
- Step 6: The bank will issue the Offer Letter.
- Step 7: The Property documents will go through the legal check.
- Step 8: The bank will go for the Site Estimation.
- Step 9: The final deal of the home loan will be prepared.
- Step 10: You sign the agreement.
- Step 11: The Disbursal of the loan.
1. Fill out the Loan Application Form and attach the Documents
Whenever you are going to apply for a Home Loan, you will be asked to fill out the application form for the Home Loan. The bank needs the application form to check basic details about you as given below.
- You will be asked to put your name, mobile number, age, etc in the application form.
- Then there will be the address where are you staying.
- You need to give monthly salary details in the Loan Form.
- The form will have a column for the education of the applicants.
- Specify the employment details or work history.
- The details of the property where you are going to build the Home.
- The estimated cost of your property.
The list of documents you will be asked to attach with the Home Loan Application form is given below.
- The Proof of Income should be given.
- You should give Identity proof like Aadhar Card, PAN Card, etc.
- Provide the Age Proof and Address Proof.
- Give your Employment details with salary proofs like Bank Statements.
- Your education/degree proof should be attached.
- The documents which show the details of the Property where you are going to build the Home should be attached.
2. Pay the Processing Fee
The bank has some processing fees for maintaining the loan account for you. The processing fees are applied for the paperwork, IT certificates, cheques, etc services given to you every year. The usual amount of processing fee will be 0.25% to 0.50% of the amount of the requested loan. You can understand it with the example, if the bank approved your load for Rs 15 Lacs then the processing fee will be Rs 3750 with 0.25 processing fee.
The applicants can bargain this processing fee, some time commission agents ask for more processing fees, and you can negotiate with them. Some banks will offer you zero processing fee, in that case, you should check other things like interest rate compression, stamp duties, etc.
3. Discussion With the Bank
The next step is that when you submit the forms with documents to the bank, the bank will check all of the documents and the process will take one or more days. Sometimes, the bank will call you to verify some documents and you should visit the bank. They will ensure that you will repay the loan within the specified time limit.
4. Valuation of the Documents
The bank will confirm that you have a property and you are going to build a Home there, they will visit your residential area and verify all the facts given in your application form. They will check the square feet of the area and all the legal documents for the property holder’s name. You should ensure to give genuine documents to the bank as any wrong document will lead to more trouble and time wastage. This process will build a clear trust between you and the bank. The bank Officer will check the following points.
- Your Residential address
- The workplace by checking the employment history.
- The phone number of the workplace.
- Your residential phone number.
5. The Sanction/Approval Process
In this stage, a bank will notify you about the approval or disapproval of the Home Loan. The bank will consider your documents while giving the approval or disapproval of the loan. The documents will be as followed that are checked by the bank.
- Your education details
- Income Proof, monthly income, or CTC
- Name of the company/organization where are you working.
- If you are self-employed, they will ask you to deposit the ITR Reports.
With this step, the bank will ensure that a person can repay the loan with the interest amount. The bank will convey the amount of loan you can get based on your documents and they will issue the official sanctioned letter.
6. Processing the Offer Letter
The bank will issue a certified offer letter that will show the amount of loan, interest rate, the nature of the interest rate whether it is variable or fixed, the tenure of loan/years, mode of the repayment of the loan amount, and in the last the terms and conditions will be specified for the Home loan.
In the next step, the bank will ask you to sign the Offer letter and you can keep an Acceptance Copy/duplicate of the Offer Letter with you.
7. Property Papers Followed By A Legal Check
The bank will verify the property where the home will be built. If a person has not yet purchased the property, he or she can buy that in the given period. When your property is selected, you will be asked to submit all the original property docs to the bank. The bank will keep the original property papers until the loan is repaid by you. It will be the security towards the Home Loan that the bank will keep with them. The property papers will include the following docs.
- What is the name of the seller?
- What is the address proof and identity of the Seller?
- Property name
- Address of the property
- The document that specifies that the seller is not the owner of the property
- NOC from the seller or the housing society
The bank will verify the documents of applicants and sellers carefully, it is called a legal check process. The bank will take the help of an official lawyer of the bank.
8. Site Estimation and Technical Check
The bank does not leave any weak points while issuing a big amount of loan to a person. They will double-check the person and documents submitted by them. An official from the bank will pay a visit to your property. The official may be the manager, Officer, CA, or architect. They will verify the following things.
- Is the home-building process started or not?
- Work Progress.
- The duration of the Home Building.
- The layout of the house is permitted or not by the govt.
- Property valuation and nearby surroundings of the area.
- The builder is legitimate and is building the home or not.
9. The Final Loan Deal
If all the above 8 sets go well, the bank will ask the lawyer to prepare the loan documents, draft them, and put the stamp on them as per requirement.
10. Signing The Loan Agreement
It is the most important step when you sign the loan agreement with the bank. The bank will keep the original documents of the property with them. Now a day video recording is kept as proof while signing the loan agreement. It is called a Memorandum of Execution/MOE, here the applicants pay a duty based on the state and stamp. If the applicant is not able to pay the loan, the bank can seize the property and have the right to sell the property to cover the loan amount. All these things will be written on the loan agreement.
11. The Loan Disbursal
The bank will disburse the loan amount to the applicant. You will receive the cheque of payment for the loan. The applicants if going for another source of payment like buying some more money somewhere else, should inform the bank about this.
Note: The applicants should be aware of the interest rates of different banks before applying for the home loan. The applicants should fully cooperate with the bank officials and submit proper documents to them and you must keep a copy of the documents with you. The bank will keep the original property papers, so you must have a copy of that for security purposes.