Everything about Home Loans one needs to know

A house loan or a home loan is essentially an amount of money lent from a financial institution or bank to buy a house. Home loans consist of flexible or fixed interest rates and payment terms. In the home loan, the owner of the property transfers the title to the lender on the condition that the title is transferred back to the owner after the final loan payment has been made and the other terms of the mortgage have been met. 

Every borrower must meet certain eligibility conditions necessary to apply for a home loan. This guarantees that the balance of the loan can be repaid easily without default.

Failure to meet the eligibility requirements could lead to a refusal to apply for a loan, leaving a negative mark on the individual’s credit profile. Ensure that the processing is done more efficiently and easily by following the necessary eligibility requirements.

Interest rates for home loans can be fixed or floating, or partially fixed or partly floating, to satisfy the needs of the borrower.

Certain tax benefits are also applicable for the home loan under Section 80EE of the Income Tax Act. However, income tax deductions can only be claimed on home loan interest by first-time home buyers.

HOW TO APPLY?

• Application:

The first step is to fill out the application with some basic information such as name, number, type of job, area pin code, etc. 

• Document submission:

On checking the eligibility criteria one needs to submit all the required documents such as property documents to be mortgaged, identity proof – Aadhaar, PAN, Voter ID, Passport, Driving License, etc. Address proof – Latest utility bill, any proof of identity with a permanent address, last salary slips or Form 16, bank account statements, proof of company life.

• Verification:

  The lender will process and authenticate all the documents submitted. They can contact the office or organization to confirm one’s employment or occupation. In this stage, they will also perform a credit inquiry to review one’s CIBIL score and credit report. The loan application will only proceed to the next phase if all the records are in order and one’s CIBIL score and credit report are acceptable.

• Sanction Letter:

  Upon satisfactory completion of all of the above steps, one will receive a sanction letter. A sanction letter typically includes information such as the amount of the loan, the interest rate, the type of interest rate – fixed or variable, and the repayment rate. A sanction letter can also include other terms, conditions, and policies for the home loan. One must sign a copy of this letter and return it to the lender to accept their bid.

• Secure Fee and Legal check:

  Once the sanction letter is signed, one has to pay a one-time secure fee. The lender will ask you to pay this fee in advance. Before disbursing your loan, the lender will conduct a legal and technical review.

• Disbursal:

  One will obtain the final agreement after all their reviews have been carried out by the lender. Lastly, the company will disburse the home loan.