Here’s a complete guide on home loans: Know how it works
What is a home loan? Want to know how it works? Purchasing a home is the dream of every person. Applying for a home loan is an exciting first step toward getting the house of your dreams. With our step-by-step guide to the home loan process, this doesn’t have to be hard to handle.
Buying a house is one of the most important choices a person can make. With the arrival of affordable home loans, many people are now able to buy a home. Buying a home costs a lot of money, so many people in India and all over the world get a home loan to help pay for some of the costs. Before there were home loans, people would save for years. Then borrow money from unknown lenders when they need it. But as consumers’ needs change and as rules and regulations get stricter, a lot of things have gotten better in the industry.
What are home loans?
A home loan is money that an individual borrows from different banks or non-banking financial companies (NBFCs) to buy a home.
How to apply for a home loan, step by step
Here is a step-by-step guide to the process of applying for a home loan, which will help you get started:
1. Fill out the form.
This is the first step in the process of getting a home loan.
In this step, you send in the loan application with your basic information.
At this step, the following information is needed:
● Personal details.
● Details about income, such as annual income
● Education details
● Business/Employment details
● Property details like residential or commercial addresses, etc
- How much the property in question is expected to cost?
- How is the property being paid for now? Different lenders may ask for different kinds of information at this step.
In addition to the information you send in with your application, you need to send in documents to back up the information you send in with your application.
At this point, you need the following documents for your housing loan:
● Proof of identity
● Proof of income
● Age proof
● Proof of address
● Proof of employment
● Proof of education
2. Details about a house:
Pay the fee for the process.
After the housing loan application has been sent in, it is important to pay the loan processing fee. Again, processing fees can be different from one lender to the next. Processing fees for home loans are usually between 0.25 and 1 percent of the loan amount. The processing fee is the amount that the lender charges the customer to keep track of the loan account. This amount may also include the agent’s commission. You can always talk to the lender about the processing fee to get a better deal. Even though banks and NBFCs have a set way to figure out the processing fee, there is no harm in asking for the fee to be lower. If the lender doesn’t charge a processing fee, compare the interest rate, duties, and other fees that will make the loan more expensive.
3. Talk to the bank about it.
At this point, the bank has checked the documents that were sent in, and the lender and the customer have a formal conversation. If the paperwork is in order, it usually takes one to two working days or less. Some lenders want you to come into the branch to talk about the housing loan, the terms, and other details. Some lenders feel more at ease talking to the applicant in person about these details and getting more information about them. But some modern lenders don’t require you to go to the branch for anything. The online process and door-to-door service from start to finish make it easy and comfortable for our customers.
- Wait for the documents to be checked.
It’s important to know that many people apply for home loans every day. To speed up the time it takes to process your application, make sure your paperwork is in order.
At this point, the lender checks the information that the applicant provided. Most of the time, the lender checks the following documents:
● Residential address
● Employment details
● Credentials of the employer
● Number to call at home
● Number to call at work
These details are checked to make sure that the applicant gave the right phone numbers and other information.
5. Get approval
This is the most important step in getting a mortgage.
It is when the lender decides whether or not to give you the loan. This is called the loan application being approved or sanctioned. Before giving the loan, the lender checks the application carefully for the following things:
● Who is applying and how old they are
● Information about the applicant’s business or place of work
● How much money the applicant makes
● ability to pay back the loan with the interest that was set
6. Get the letter from the court: The lender should send a “sanction letter” after looking over all of the documents that the applicant has sent.
7. Submit your property documents. After the lender accepts the offer letter, it’s time for the lender to pay attention to the property in question. Even if the applicant hasn’t decided on a property yet, the lender may give them some time to do so.
8. Make sure there are technical checks and a site estimate: Since a home loan is a secured loan in which the house itself is used as collateral, every lender is very careful to check all the technical details of the property to give it a fair value. The lender can check the property by sending an employee, a civil engineer, or an architect.
9. Close the deal on the loan: After all of the technical checks are done and the lender is happy with the property for which the housing loan is being given, the final registration of the deal is the next step. The lender’s lawyer should finish up the paperwork and get it stamped in the right places.
10. Sign agreements: After all the paperwork is in order, both parties need to sign the papers. The lender signs the papers first at this stage. When the applicant has to sign and send in the paperwork. He or she is expected to send in post-dated checks for the amount of time that was agreed upon by both parties.
- Wait for the loan to be paid out.
This stage is the last step. After all of the paperwork is done, the housing loan is given out. The lender may ask you to show proof that you have saved up for the down payment. Most of the time, the seller or builder of the property being bought is the one who gets the money from the loan.
Summing up
This article’s goal is to provide clarity about the home loan, how it works and its step-by-step process . Before going for a home loan. You should have the proper and relevant knowledge about home loans and its process. Home loans are a great way to purchase a home for those who don’t want to take any risks to make money.
As time goes on, the returns increase because of a process called “compounding.” FDs are flexible because investors can take some or all of their money out early. Pay attention to the information mentioned before while making any decisions. Take your decisions wisely.
Also visit, Piramal Finance for more in-depth, educational articles.