A home loan is a type of secured finance mode that provides funds to buy a home or build a home. 

There are some types of home loans available in the Indian property platform, such as

1. A Land purchase loan to purchase land for a new home
2. A home construction loan to build a new home,
3. A home loan balance transfer that is to transfer the balance of an existing amount at a lower interest rate
4. A top-up amount funded to renovate an existing home.

There are several steps for sanctioning or approval of a home loan.

Application for a loan

The first step of a home loan is to apply by providing a few details such as Name, Contact Number, Type of Employment, etc. The representative will get in touch with the applicant for further follow-up of the loan process. 

Documentation for a loan approval

The applicant has to submit the required documents for the process.

Required documents for home loan include 

1. Documents of the property to be mortgaged
2. Identity Proof
3. Address proof
4. Latest salary slips or Form 16
5. Bank account statements
6. Proof of business existence.

Process and Verification of the documents

There are many lenders available in the market for home loans, most probably the bank authenticates who verify every document submitted by the applicant. Bank or any  source may also confirm the employment and occupation of the applicant.

During the verification process, the lender conducts the credit inquiry to check the applicant’s CIBIL score [Credit Information Bureau Indian Limited] and credit report. CIBIL score is the record of the applicant’s past borrowings and repayment habits.

Loan application moves to the step ahead when all the documents are in order and satisfactory of the credit report.

Also Read: Tips For Buying A New Home: Freshly Constructed

Sanction Letter And Secure Fee Payment

An applicant receives a sanction letter after completing all the steps of verification.

A Sanction Letter usually contains detailed information about the amount, rate of interest, fixed or variable type of interest, and repayment tenor. A letter may also include other terms and conditions with the home loan policies of the property buyer.

The applicant also has to sign a copy of the letter and revert to a source of a lender an acceptance of the offer.

A property buyer whose loan is sanctioned by banks or any other sources has to pay one-time secure fees after signing the sanction letter. The source may ask him to pay this fee even before.

 Legal and Technical Check

Bank or any other source performs a legal and technical check before giving a loan disbursal to the applicant. Usually, they send a representative from their end for the inspection process.

 The loan agreement and disbursal

An applicant receives a final agreement after the bank performs all their check.

The important key stage of a home loan process is Disbursal. It includes some principal routines.

Documents: An applicant submits a signed duplicate copy of the offer letter and informed about the property documents need for disbursal of the home loan.

Legal Examination of Documents: The property papers such as own contribution receipt, NOC [No Objection Certificate], and sale deed will be examined by legal experts or lawyers. The report gives the acceleration towards taking the process further or added documentation may be needed.

Down Payment Amount and Date: The applicant will be informed about the date of down payment and first installment required by the lender source or bank.

Transaction Documents: Documents to be executed include the Credit Facility Application Form and others that will have to be done.

Disbursement of The Amount: The amount will then be disbursed in a single or more installment, post technical and legal property verification, and subject to the sanction letter’s terms and conditions.

Also Read: How To Choose The Right Builder For Your New Home?

A loan applicant can make this process easy and improve home loan eligibility by following further tips.

Pay higher down payment, Maintain the credit score, Utilize the co-applicant feature, Pay attention to the application form, documentation, and Errors of the credit report, And Being prompt in responding to the lender.