A Guide on How and When to Apply for a Home Loan

When it comes to home loans, people generally have a lot of questions and confusion. The entire process is quite nuanced, after all, it involves a huge amount of your hard-earned money. Multiple financial organisations are ready to help you with every financial requirement but there are certain decisions that you have to take for yourself. 

This article will guide you through the right procedure to follow while availing of a home loan. 

How should you apply for a home loan?

The process of becoming a home-owner can be very stressful but in the end, you know it’s rewarding. Here’s a step-by-step guide that’ll help you apply for a home loan with ease: 

Step 1: Fill out the application form and gather and submit all the necessary details and documents. The application form will require a few of the below-mentioned details: 

• Name and other personal details of the applicant
• Residential details of the applicant 
• The monthly or annual income of the applicant 
• Employment details of the applicant 
• Educational details of the applicant 
• The estimated cost of the property the applicant is availing loan for 
• Property details 
• Current means of financing the property

A few of the other documents that are required by the applicant to submit are: 

• Age proof
• Identity proof
• Income/salary proof
• Address proof
• Educational proof
• Employment details
• Bank statements
• Final property details and proof 

Step 2: Once the form is filled and the documents submitted, you have to pay the processing fee to the bank. This amount is to be deposited to the bank to maintain the loan account. The amount is usually some percentage of the home loan requested. The percentage could vary from 0.25% to 0.5%, depending on the bank you choose to avail of the loan from. 

Step 3: After all this is done, the bank will take its time to go through all the documents and details submitted by the applicant. This usually takes about three to four days to get done with. Once the bank is done going through, there will be thorough scrutiny and verification of the details provided will take place. The bank will get some representative to primarily examine the applicant’s residential and employment details such as the credentials of the employer, workplace contact number and so on. The references provided by the applicant are also contacted to do a background check of the applicant.  

Step 4: After all the examination is done, the bank will then move forward to give its verdict. This is where the entire process hangs, the loan could either be approved or rejected based on how convinced the bank is with the application and is sure that you will be able to pay the bank back. Once the loan is sanctioned by the bank only then can the process move forward. 

Step 5: Once the bank decides in your favour, a certified offer letter is sent over to you. The offer letter contains the following information: 

• The amount of loan you’re eligible for 
• The interest rate you’ll be charged on the total loan amount 
• Details about the interest rate (variable or fixed) 
• Means of loan repayment 
• Terms, conditions and other policies regarding the loan 

After the offer letter is read and agreed to, the applicant is supposed to send the signed duplicate copy to the bank for their records.

Step 6: Technical examination of the property purchased is followed thereafter. The bank sends a technical expert to check the site the applicant is planning to buy. The inspection includes information such as the quality of the construction, the surroundings of the property, the layout of the house, etc.

Step 7: After all this is done and the bank is completely satisfied, the final registration deal is signed, and the loan agreement is then signed. The applicant is to submit cheques (post-dated) for the decided duration by the applicant and the bank. The loan amount will finally be disbursed in the account, in parts or fully, as the bank allows. 

After all the legal check is done and agreed upon, the loan is disbursed either in parts or fully. 

When should you apply for a home loan? 

It might not seem like it but considering the time you apply for a home loan could prove to be extremely crucial during the process. There are a few factors to keep in mind and in check while deciding when you should apply for a home loan. Let’s take a look at what those are: 

1. When you’re sure that your monthly income is stable and good: unless this condition is met, letting some amount of money be taken from your bank account every month as part of EMI, will take a big hit on your day-to-day activities.

2. When the interest rates are lower: low-interest rates mean low EMIs to be paid and therefore less financial burden on you. The flow of interest rates could be either fixed or variable. 

3. When you’ve worked for a considerably long time: if you’ve recently started working the bank might not see you eligible enough to pay back a home loan and there’s a good chance you’ll be rejected. Whereas if you have good numbers of professional experience behind you, the bank will know that you have a higher repayment capacity. 

4. When you have cleared your other obligations: if you’re already under other loan-related obligations such as personal loans or educational loans, you will have to deal with increased responsibility and even more stress to pay the bank back. Other than this if you already have other amounts to pay back the loans sanctioned alongside will be less and less and thus might not be enough to get a home loan. This will also help you boost your credit score and hence lower interest rates will apply. 

Conclusion

It’s important to understand and know your options when it comes to availing of a home loan, hoping this article helped you in making a sound decision. 

Along with this, there are multiple resources on the internet that can help you recognize all things finance, but isn’t it better to learn from the best? Piramal Finance is your key to the best. Learn and explore as much as you want to.