Before applying for a home loan, willing candidates should know how a home loan works. This will help them determine the total time needed to complete the loan procedure. This article highlights the complete home loan procedure. Read on to know more about the same.
Step-by-step guide on availing a home loan
Irrespective of the principal borrowing amount, here are the steps involved when you apply for a home loan in India:
Step 1: Home loan application
Candidates can opt for a home loan by visiting their preferred lender’s office or using the online method. However, the online mode expedites and streamlines the entire application procedure. Willing borrowers will have to visit the official website of their preferred lending partner, fill up the online application form, submit the necessary documents and wait for the lender’s response.
Step 2: Collection of the necessary documents
Following this, the applicant will have to submit the documents required by the lending partner. Here is a list of the basic documents that almost every financial institution requires:
- All property related documents
- Identity proof
- Address proof
- Last 3 month’s bank account statement
- Qualification details
- Income proof
Step 3: Verification of the documents
In this step, the lending institution checks and verifies all the documents submitted by an applicant. They will also check the credit history and credit score of the candidate to assess his/her creditworthiness. Hence, it is a wise decision to check the CIBIL score and home loan eligibility criteria before applying for this credit line. If you are wondering how to calculate home loan eligibility, one can take help of a home loan eligibility calculator to know where they stand and ensure a smooth borrowing experience.
Step 4: Getting the sanction letter
After successfully completing the steps mentioned above, a sanction letter will be sent to the applicant with the following information:
- Principal loan amount
- Interest rate as charged by the lender
- Interest type (floating or fixed)
- Loan repayment tenor
Further, the sanction letter also comprises the terms and conditions of the credit. Upon getting this letter, borrowers will have to sign it and revert to the lender.
Step 5: Paying the applicable fees
Once the sanction letter is accepted, borrowers will have to pay a one-time fee as asked by the lending institution.
Step 6: Other checks by the lender
The financial institution will conduct a technical and legal check before they disburse the principal amount. For doing so, they will send representatives from the firm to conduct the inspection.
Step 7: Loan agreement and disbursal
Finally, the lending partner will offer an agreement paper and disburse the loan amount once the applicant signs the agreement.
Knowing the monthly instalments before applying for a home loan helps to make a detailed monthly budget. In this context, one can use an online home loan EMI calculator to determine the EMIs beforehand. This customised online tool is offered by most lending partners and can be used as many times as required.
A home loan comes with several benefits, including flexible repayment tenor, low interest rates, etc. Further, one can also reap tax benefits on a home loan under Section 24(B) and 80(C) of the Income Tax Act of 1961.
Once you know how a home loan works, ensure selecting the right lending partner. Before applying for a loan, borrowers must also assess their repayment capabilities to avoid failed or missed EMI.
Read More:- You Must Know How A Home Loan Works In India
