HOME LOAN

To make your home loan journey a smooth sail, in this article we will help you to know eligibility criteria, rates of interest, process, necessary documents, EMI comparison and transfer for lowest rates.

Home loan is really critical and important financial decision in our lives. Before you finalise your bank to secure home loan, try to get more information on current interest rates from different banks. First, gather some more information about how much each bank can give you. Find out eligibility for government and private banks. Which interest rate is more flexible and affordable such as fixed rates or floating rates? What is more easy a prepay option or balance transfer?

We try to give answers to all such questions, and make this home loan process simple for you. To find the lender for 20 years term go through the fine print and save for years to come. A perfect Home loan is loan which gives you lowest rates throughout the tenure, has part payment options and allows you to balance transfer if you wish to.

Should I take Home loan now or wait?
Home loan is a long term investment plan. Generally, people opt for a home loan for 20 to 30 years. Mostly customers avail loan on floating interest rates. Rates keep changing and long-term loan such as for 20 years or more than that is impossible to decide. Home loan rates will change in 20 years, so making a decision to take a home loan just base of the reason of interest rates is not a smart idea. So thinking to start a loan at a lower rate has no relevance.
The right time to take a Home loan is when:

  •  The Property you intend to buy is good and cannot be missed or it is expected that the price of   property will rise.
  • The EMI that you have to pay per month is above your monthly expense budgets etc.

Home Loan –  Let’s simplify how this will go about and what are the steps.

The first step involved in the process is to find your property, which is followed by the verification of property documents, post that the documents are examined. Simultaneously, you can start searching for the lender who can offer the best home loan deal after checking your eligibility criteria.
Know the Home Loan Eligibility: Banks offer the loan amount based on your monthly income and the value of the property. They will give you max amount in which your EMI of home loan and others loans is 50-60% of your income. Other factor is value of that property.

Select the Best Home Loan after evaluation: Comparing home loan interest rates of various banks is the primary feature in the home loan selection process. However, you should not also forget to compare other fees & charges like application fees, processing fees, legal charges of different loan offers. To check the interest rates & other charges incurred by various banks, Loan4india.com has brought in a Home Loan Comparison Chart across various government and private banks. Banks offer fixed and floating rates in home loans.

Most customers choose Floating rates

Applying for the Loan :  After you have selected your lender, you have to fill in the application form, wherein the lender requires complete information about your financial assets & liabilities; other personal & professional details together with the property details & its costs.

Documentation & Verification Process :  You are required to submit the necessary documents to the bank, which will be verified together with the details in the application

Credit & default check :  Bank checks out the borrower’s loan eligibility (through repayment capacity) & the amount of loan is confirmed. The borrower’s repayment capacity is reached, which is based on the income, salary, age, experience & nature of business etc. Bank also checks credit history through the Cibil Score, which plays a critical role in deciding & approving your loan application. Low credit score implies that the bank upfront rejects your application on the basis of earlier credit defaults; on the other hand high credit score gives a green signal to your application

Bank sanctions Loan & Offer letter to the borrower :  After the credit appraisal of the borrower bank decides the final amount & sanctions the loan, the bank further sends an offer letter to the borrower, which constitutes the details like rate of interest, loan tenure & repayment options etc.

Acceptance Copy to the Bank :  The borrower needs to send an acceptance copy to the bank after the borrower agrees with the terms & conditions in the offer letter.

Bank checks the legal documents :  The bank further asks the legal documents of property from the borrower to check its authenticity, so as to keep them as a security for the loan amount given. The next step involved is the valuation of the property by the bank which determines the loan amount sanctioned by the bank.

Signing of agreement & the loan disbursal:
The borrower signs the loan agreement & the bank disburses the loan amount.

Documents required in Home Loan
Generally, the documents required to process your loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions to process the loan application:

  •  Income
  •  Age Proof
  •  Address Proof
  •  Income Proof of the applicant & co-applicant
  •  Last 6 months bank A/C statement
  •  Passport size photograph of the applicant & co-applicant
Documents Required for Home Loans in India 2018

Documents Checklist requirement for Housing Loan in India

Generally the documents required to processing your home loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions to process the loan application:

  •  List of papers / documents applicable to all applicants:
  •  Completed Home loan application
  •  3 passport size photographs (including those affixed in loan application)
  •  Proof of identification: Electoral ID Card / Passport / Driving License / PAN card.
  •  Proof of residence: Electoral ID Card / Passport / Electricity Bill / Telephone Bill.
  •  Proof business address, in case of non- salaried borrowers
  •  Statement of bank account for the last six months
  •  Signature identification from present bankers
  •  Personal Assets and Liabilities Statements in Bank’s standard format.
  •  Brief write up of securities charged in respect of other loans availed from our Bank/other
  •  Banks/ Auto & Housing Loan Companies /other sources.

Additional documents required for salaried persons:

  1.  Original salary certificate for last month.
  2.  TDS certificate- Form 16 or copy of I.T. Returns for the last two financial years, duly
  3.  acknowledged by I.T. Deptt.
  4.  For professional /self- employed / businessmen
  5.  Three years I.T.Returns duly acknowledged by I.T Deptt./ I.T. Assessment Orders for
  6.  computation of income
  7.  Copies of challans in respect of advance payment of income tax

(* photocopies to be kept for our records after verification of the originals with suitable nothing regarding verification of the original)

Property documents

a) Sale Deed, Agreement of Sale. Original Share Certificate(s) issued by the society.
b) Land and Building tax paid receipts, possession certificate, and location sketch of
Property certified by revenue authorities.
c) Letter of allotment from Housing Board /Society/ Private builder.
d) Original receipts regarding advance payments towards purchase of flat .
e) Non encumbrance certificate for the last 12/30 years.
f) Original of land tax paid receipt and possession certificate issued by the revenue
authorities.
g) Copy of permission from Appropriate Authority and approved building plan (and also
key plan / floor plan incase of purchase of flats)
h) Original NOC under ULC Act 1976
i) Copy of the relative order in case of conversion of agricultural land.
j) Original No objection certificate from Housing Society / Builder
k) Detailed estimate of cost of construction of House
l) Letter from the Builder / Society /Housing Board intimating their account number and name of their bankers, for remittance of installments.

Other documents

a) In case of loan granted for purchase of plot of land, declaration by the borrower agreeing to
construct the house within the stipulated period.
b) Lawyer’s report as per the standard format (Bank’s of Instructions)
c) Valuation report from empanelled valuer as per standard format.

How is my Home loan Eligibility Calculated
The borrower’s eligibility of getting a housing loan depend upon his/her repayment capacity & the banks establish this repayment capacity by considering various factors such income, spouse’s income, age, number of dependants qualifications , assets, liabilities, stability and continuity of occupation and savings history. Eligibility Factors in Housing loan Your Home Loan eligibility is determined by your repayment capacity and the value of the Property

  •  Income
  •  Qualifications
  •  Age
  •  Spouse’s income
  •  No. of dependants
  •  Stability and continuity of occupation
  •  Assets/LiabilitiesM.
  •  Savings history.

The most important concern of banks in determining your loan eligibility is that whether or not you are contentedly able to pay off the amount you borrow.

The Second factor is the value of the Property

Banks are okay to fund 75-85% of property value but with the condition that you have income capacity that you can pay its Emi each month.

Fixed and floating rate of interest
When you avail a home loan EMI is calculated either on fixed rate of interest or according to the floating rate of interest. Before finalizing either, you must take a note of both the patterns and take a well-calculated decision. Generally, home loan is taken for a longer tenure compared to other loans such as personal loan or car loan. You borrow the loan for at least for10 years and maximum upto 30 years. In such scenario, you end up paying a huge amount as interest on your principal amount. Therefore, the difference of 0.5% can make huge impact on your overall interest amount. Let’s take a close look at both the patterns of interest.

Fixed rate of interest : Generally, in fixed rate of interest, the percentage of interest is fixed for whole tenure and same percentage of interest is charged throughout the loan. It makes the EMI payable at a constant sum throughout the tenure. Therefore, it is always recommended that you opt fixed rate of interest only when the rates are bottom down and if an upward trend is expected.

Floating rate of interest : Floating rates of interest changed with the market lending rates. Therefore, these rates are prone to fluctuations. The interest rate on your EMI might get increased or decreased depending upon the fluctuation in the market lending rates. In this case, bank provide an alternative to increase the tenure of the loan, at a constant EMI, for the borrowers who do not desire their EMI to be increased in case of higher interest rates.