Most of us want to own a dream house, but doing so can be difficult for some people. Luckily, getting a bank loan for a house has become very convenient and popular.
However, the loan process can be overwhelming for many people. This is precisely why you should read our article till the end. Because today, we will share the step-by-step process for getting a bank loan for your dream house.
While the process may differ depending on the vendor, the general procedure listed below is standard among most banks. So without further ado, let’s dive into the smooth and hassle-free home loan process.
Step #1: Loan application & required documents
This step involves filling out the application form and providing the required documents.
Information related to the applicant that is required for the application form:
- Personal details
- Residential address
- Monthly/Yearly income
- Education details
- Employment details
- Property details (on which the loan is applied)
- Estimated cost of property
- Present means of financing the home property
- Income verification
- Identity verification
- Age verification
- Address verification
- Educational verification
- Bank statements
- Property details on which loan is applied
Step #2: Processing fee
After completing step #1, the applicant must pay the processing fee to the bank. This amount will be used to maintain the applicant’s loan account.
The processing fee of a bank usually:
Ranges from 0.25 % to 0.50 % of the requested loan amount.
For example, if the applicant has applied for a home loan of Rs. 15 lakh, then the processing fee will be Rs. 3,750 (at 0.25%) and Rs. 7,500 (at 0.50%) respectively.
Step #3 Discussion with the bank
After submitting all the necessary documents, the applicant may have to wait 1-2 days before the bank thoroughly checks the papers.
There might be instances where the bank may request the applicant to have a face-to-face interaction before the loan request is approved. This is done to ensure that the applicant can repay the loan with the interest amount.
Step #4 Valuation of the documents
The applicant must remain genuine throughout the loan process. Any fraudulent document or activity is unacceptable by the bank and can lead to financial or legal troubles.
As soon as the application form & documents are submitted, and the processing fee is paid, the bank authority evaluates them.
Step #5 The sanction/approval process
This is the most crucial part of any loan application. It all comes down to the bank whether they approve or reject your application. If the information and documents you provide are legitimate, you may have a higher chance of getting your loan approved.
If your application gets approved, it can be either unconditional or contain a few policies, which the applicant must fulfill before the disbursal.
Step #6 Offer letter
After the loan approval, the bank issues a certified offer letter that contains the following details:
- Loan amount
- Whether the interest rate is variable or fixed
- Loan’s tenure
- Loan repayment mode
- Terms, policies, and conditions of the home loan.
- Acceptance copy
Upon the applicant’s agreement to the letter, they must sign a duplicate copy of the offer letter, which the bank keeps.
Step #7 Property papers processing and legal check
After the offer letter acceptance, the bank focussed on the home property applicant is interested in purchasing.
The applicant has to submit all the original property documents to the bank. It remains with them until the loan is repaid. Also, this serves as the security towards the home loan the applicant has applied for.
The original property papers will generally include the following details:
- Seller’s Name
- Seller’s identification and address proofs
- Property Name & address
- The chain of written documents if the seller isn’t the primary or actual owner.
- NOC (No Objection Certificate) from the primary legal owner (if any).
- NOC from the statutory development board representative & cooperative housing society.
- If the land is already on a lease, the bank will also require a NOC from the lessor.
Step #8 Processing a technical check & the site estimation
Every bank is prudent when the lending loan and the home property it plans to finance. The bank carries out a technical review and site estimation.
Usually, the banks send an employee, civil engineer, or someone from an architect firm to check the premises an applicant intends to buy.
The visit to the “site property” is conducted to verify the details given below:
- The construction stage & quality
- Work progression
- Time required to build the house
- House layout and whether the governing authority has permitted it or not
- Property valuation and the environmental areas
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If the construction is already for resale or in a ready stage, then the representative will check for:
- Building’s age
- Internal or external property maintenance
- Loan tenure and if the building falls within the applicant’s loan eligibility criteria
- Quality of the construction
- Surrounding area
- Valid requisite certificates to hand over the flat/house’s possession to the buyer
- Existing mortgage on the home property
- Property valuation
- Building’s approval plans, following the government laws, etc
Step #9 Final loan deal
After technical and site estimation is completed and the lawyer has cleared all the paperwork, the next step is the final registration of the deal. Then, finally, the bank’s lawyer finalizes the loan document, drafts, stamps, and signs them.
Step #10 Signing the loan agreement
After the paperwork is complete, the applicant must sign the home loan agreement. After this, the original property papers must be handed to the bank.
Step #11 The loan disbursal
After the applicant signs the papers and everything is legally clear; the loan amount is handed to the applicant via cheque. However, before this can happen, the applicant must submit a few essential documents to the bank, as these will serve as their contribution to the home property.