4 MinsJan 22, 2021
Dinesh Thakur is a 30-year old IT sector employee. He is thinking of buying a home in 2021. He needs a home loan of Rs. 60 lakh. He is, however, not very clear about the application process and what documents he should keep ready. Here is what he should know.
There are broadly eight steps to the loan application process:
1. Fill up the home loan Application Form: Every would-be borrower, like Dinesh, has to fill up a home loan application form. This will involve information like name, address, income details and proof, employment details, education details, and phone number. Dinesh will also have to furnish proofs for all the above as well as salary slips-for the latest 3 months, employment proof, bank statements – for the latest 6 months and the latest Form 16, since he is a salaried employee. Self-employed borrowers will have to provide the full set of ITR returns for the last two years along with other income documents.
2. Pay the Processing Fee: After Dinesh submits his documents he has to pay the initial processing fee as decided by the bank, which is non-refundable. This is charged for the preliminary work the bank does to verify borrower details and to investigate the property’s value and ownership title. The remaining processing fee is taken later on at the time of disbursement. But Dinesh’s loan will not be approved just because he has paid these fees. The fees vary from bank to bank. It may be either a fixed amount or a percentage of the loan amount. Axis Bank, for example, charges a fee up to 1% of the loan amount (with a minimum of Rs. 10,000+ applicable taxes).
3. Bank Discussion: The bank usually takes a decision as per bank credit policy on whether to approve or reject the loan application within 5 working days. The bank may call Dinesh for a telephonic discussion. This is the case for most salaried employees. In case of self-employed borrowers, the bank’s representative may visit the customer’s place of work for personal discussion and to understand about their business. This will help the credit underwriter to upraise loan in a better way.
[Also Read: Home Loan Balance Transfer - All You Need To Know]
4. Document Verification: Once the bank completes the personal discussion with Dinesh, it will start calculating his eligibility. This could involve a bank official visiting his current residence and/or getting in touch with his employers. The bank will check Dinesh's credit score with a bureau like CIBIL.
5. Approval Process: This is the process (as per Bank Credit Policy) that will decide if the bank will approve Dinesh’s loan application. Dinesh has to make sure that all his documents are in order; otherwise, his application may get rejected.
6. Sanction Letter: The bank will send Dinesh a loan sanction letter if his loan is approved. This letter will contain Dinesh’s eligible loan amount, interest rate and type (fixed or variable) applicable, loan tenure with terms & condition. If Dinesh accepts it, he has to sign it and send a copy to the bank.
7. Property Verification: Now that the loan has been approved and accepted, the bank will verify the property. It will do a legal check on the property to ensure the title is clear and there is no dispute or conflict regarding the same. It will also conduct a technical valuation on the property. If the property is under construction, it will check the stage, progress and quality of construction as well. If the property is a resale property, the bank will check the age, quality and maintenance levels of the building. It will also check if the property is already mortgaged. Dinesh will have to submit all property papers, including original copies of the title deed, to the bank. These papers are mortgaged with the bank until Dinesh repays the loan in full.
8. Loan Disbursal: Once the property verification is complete, the customer has to provide all documents as per legal and technical reports. Following this loan agreement is signed and if all documents are in order, the loan will get disbursed and the cheque will be handed over to the customer. The cheque may be made in favour of the builder, if you are purchasing the property from a builder.
Post-disbursement, the bank will send the customer the welcome kit, along with the repayment schedule. The EMI payment is done either through Standing Instructions, if the account from which payment is being made is from the same bank, or through NACH mandate - if the account from which payment is being made is with another bank. (NACH or Nationalised Automated Clearing House Payment Solution is the centralised system that facilitates the seamless transactions between banks).
Currently, interest rates on home loans are at historic lows, and anyone thinking of buying a home should capitalise on the opportunity. Axis Bank offers a range of home loan products suited to the needs of all its customers.
Click here to find out more about Axis Bank Home Loans. You can check your eligibility by clicking here for the Axis Bank Home Loan Eligibility Calculator.
Disclaimer: The Source, a Mumbai-based content creation, and curation firm have authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.