A home loan is a secured loan obtained from a bank for the purpose of purchasing a residential property. A home loan can be used to purchase a ready-to-move-in house, a flat or apartment, as well as one that is still being built. Home loans are available from both banks and non-banking financial institutions. These have different interest rates that are frequently tied to your credit score. Home loans are normally for up to 30 years and must be paid back in Equated Monthly Installments(EMI). Under Sections 80C and 24, respectively, of the Income Tax Act, you can deduct tax on both the principal and interest component of your home loan.
Home Loan Application Process
The steps to apply for a home loan are as follows:
- Fill the loan application form– The application form is the first step in the process of getting a home loan. A few basic details about the applicant will be required for this loan application.
- Attach the documents with the application form– After you’ve completed the formal application, you’ll need to attach all of the valid documents that the bank requires. This usually comprises the following: Income proof, Identity or ID proof, Age proof, Address proof, Employment details along with your Bank account statements.
- Pay-in the processing fee– The applicant must pay the processing fee to the bank after completing the formal application and document submission process. This is the money collected to keep the applicant’s loan account in good standing. Every year, it requires sending some confidential papers (such as IT credentials, post-dated checks, and so on).
- Documents Valuation– Keep in mind that millions of people apply for house loans every day, and in order for the bank to accept the paperwork as quickly as possible, the applicant must be honest throughout the process. The bank will not accept any fake documents or fraudulent conduct. It is a criminal infraction that can lead to more serious consequences. The bank authority reviews the application form and papers after they have been submitted and the processing fee has been paid.
- The Loan application evaluation process– One of the most important stages of the home loan procedure is approval or sanction. This can either yield a positive outcome or be rejected. Everything boils down to the bank. If it is dissatisfied with any of the applicant’s documents, the likelihood of acceptance decreases. If all goes according to plan, the loan will be sanctioned or approved quickly.
- Processing of Offer Letter– If the application gets approval, then the bank sends a certified offer letter.
- The processing of the property papers followed by a Legal check– Following the applicant’s formal acceptance of the offer letter, the bank focuses on the house property he or she wishes to purchase. Even if it hasn’t been finalized, the applicant can ask for a time limit to choose one.
- The Final Loan Deal– The following step is the final registration of the agreement, when the bank has completed the technical and site estimations and the lawyer has cleared all of the documentation. The bank’s lawyer completes the loan documentation, writes them, and has them stamped and signed.
- Signing The Agreement– Following the completion of the documentation, the applicant must sign the house loan agreement. He/she must produce post-dated checks for the first 36 months or the term agreed upon by both parties.
- The Loan Disbursal– The loan amount is issued by check after the applicant signs the papers and everything is legally clear. However, the applicant must first provide a few important documents to the bank, which will serve as his or her personal contribution to the home.
The above is the process to apply for a home loan in any of the major banks of the country. However you should check your housing loan eligibility before applying for a home loan.