A Complete Buyers Guide on the Home Loan Process in India

by anveshajain

Buying a home is a dream come true for many people. Now a day, purchasing a home can be stressful due to the increasing real estate prices and also due to the immense paperwork required if the property is bought on a home loan. Therefore, it is better to have knowledge of the home loan process in advance. While home loan processes have evolved to become borrower friendly in recent years, one still needs to comply with the lender requirements for successful completion of the loan application.  It is necessary for people to carefully review their eligibility and compare the home loan interest rates offered by various lenders. But what is equally important is to know how to go about applying for a home loan after you have short-listed a property.  If you are not sure of how to apply for a home loan, then this article is a must read for you.   


The Home Loan Process Comprises the Following Six Steps


  1. Fill the home loan application form

Filling an application form is the first step to start-off any process, professional or otherwise. The home loan process is no different. If you are looking to avail of a home loan, then you need to begin with filling out the home loan application form. The good part in today’s internet age is that you need not visit any bank’s branch in person and can fill the form from the comfort of your home (online). Each bank has its own application processes, but most of them are rather straightforward. The bank would simply seek basic details like: identity, age and address proof, educational qualification, employment, and income details. You would also have to provide some details of the property that you plan to purchase like location, market value, etc., along with the amount required as home loan and the share you are willing to pay as down payment. 


  1. Document and Background Verification

After you have filled in the above-mentioned details in the online home loan application form, you’ll be asked to submit or upload the proofs of the information shared in the form. While you can always calculate your eligibility on your own using the home loan eligibility calculator available online, the final decision rests with the bank and the bank will decide based on the documents you provide. The bank will verify all documents and do background verification to assess your loan eligibility and ability to repay within a stipulated tenor.  Here is a list of the documents your bank/lender will ask for:


  • Identity card: PAN and Aadhaar Card
  • Age and residence proof
  • Educational qualification documents
  • Proof of employment
  • 3-6 months’ banks statements
  • Income proof (e.g. payslips and IT returns)
  • Property details, if shortlisted


  1. Home Loan Processing Fee Payment

Once your bank has assessed your capacity to afford and repay the home loan, your bank will charge you a processing fee, which could be anywhere between 0.25% to 1.0% of the loan amount. The lender charges this amount for conducting background verification and maintaining the loan account. Please remember that this fee is non-refundable.


  1. Approval and Sanction

This is the most important step of the home loan application process as during this step, the bank or the lender takes a decision on whether it will approve or reject your loan application.  If approved, the bank will send you a sanction letter which will list out the maximum approved loan amount, applicable home loan interest rate, and tenor, along with broader terms & conditions applied on the loan.


  1. Property Verification

As a home buyer, it is not only you who verifies the legal documents of the property, the bank too conducts its own property verification to ascertain that title is clear and the property is free of disputes. The lender’s team will also do a technical evaluation of the property i.e. will check the construction quality and status, if under-construction.  For these purposes, you will be asked to submit the original property documents, such as sale agreement, which will remain in lender’s custody until you have repaid the loan amount in full. It is also worth highlighting that the builder’s credibility is an important parameter for the banks for approval of your home loan amount.


  1. Disbursement of Home Loan

This is the final step in the process. As a borrower, you will have to pay the stamp duty charges and provide post-dated cheques to the lender and sign the home loan agreement.  On completion of these formalities, the bank will disburse (full or partial, depending on the construction status of the property) the agreed loan amount directly into the builder’s account, the housing loan EMI of which will start getting debited from your own account.

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