A detailed step-by-step guide to fulfill that dream of Apna Ghar (Home loan).
Taking a home loan is a tedious process. Even more so, if you do not know the general procedures. Often, the loan applications get rejected due to a lack of knowledge. Here is a list of the most important things that you should take note of. You must know the following requirements and prepare them beforehand to get that loan acceptance offer letter.
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LOAN APPLICATION
In order to get a loan, the first step that you need to take is – to apply for a loan application. You have to apply for the amount of loan that you seek from a particular bank. How to choose a bank? You should compare the interest on home loans given by various banks. You can do so by going online and checking the websites or you could simply visit your nearest bank and make an offline inquiry.
After you have selected the bank, you should pay a visit to the bank and negotiate and finalize the loan interest rate and the processing fees which are anywhere around 0.25% to 1% of the loan amount. During the processing, banks usually charge for verifying the provided information. You must negotiate and finalize that as well.
How to make your loan application
You will need the following documents to do so.
- Application form with self-attested photographs.
- Identity proof, Address proof, and age proof- Aadhaar Card, PAN Card, and Passport.
- Last 6 months’ bank statement.
- Last 3 months’ salary slip. Business owners have to show proof of business existence and their business profile. Both self-employed professionals like CAs and doctors and self-employed non-professionals like business owners have to show their educational qualifications.
- Processing Fees Cheque is to be given along with the application form itself.
- Form 16/ Income tax return filed for last year is to be shown. Additionally, self-employed professionals and non-professionals must provide the last 3 years Income-tax return with the computation of income. Also, they must submit the last 3 years’ Balance Sheet and Profit and Loss Statement audited by a CA.
- VERIFICATION BY BANK– The bank shall perform the act of due diligence based on all the information given by you. They shall verify and scrutinize all the information to decide whether you are suitable for the loan sanction.
Financial due diligence
The bank shall verify that your source of income is legitimate and existing. Furthermore, they shall check your financial standing, meaning whether or not you are under any other loan, or that you would be able to pay the EMI considering the lifestyle that you have (including your monthly expenses and investments).
Your bank statements are scrutinized to know about the number of transactions you make, the average bank balance, and the number of cheque clearances and cheque bounces. Your Credit Score given by CIBIL is also checked in order to know your credit history- if you have taken any previous loans and how diligent you have been in repaying them.
Legal Diligence
The bank shall check the title deed of the property that you want to purchase. It will make sure that the title deed is in the name of the seller and that there are no encumbrances, meaning no third party holds a right over the property. The bank shall also ask for the agreement for sale between you(buyer) and the seller.
Field Investigation
They can visit your company to check if you are an actual employee working there. They shall analyze how stable of a job you have. Bank representatives shall visit your residential address and verify your contact details.
Technical Diligence
Bank representatives shall personally visit the property that you intend to purchase with the loan amounts to make sure the property exists and is free from encroachments. They shall also appoint an independent valuer who shall confirm if the property is even worth the loan amount or not.
LOAN SANCTION
After a careful and detailed scrutinization, the Bank shall decide on the EMI that you would be able to pay. The loan offer letter is sent stating the amount of loan sanctioned, the interest rate for the loan whether it is fixed or variable as per the market fluctuations, the period for which the loan is sanctioned, and any other conditions to abide by.
You need to sign the offer letter to accept it. Pay a visit to the bank and have a one-on-one discussion with the bank official to understand all the conditions regarding the loan. You are all set to get hold of a home loan now.
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