Applying for Loan

Loans may be applied for before or after selection of property. The loan amounts are sanctioned in principle to let buyers know what amounts they can avail of. This helps them decide their budgets and purchasing power. Actual disbursements are made after satisfactory verification of all necessary documents and completion of specific procedures.

Time required for loan application approval:

About 0-15 days.

Time required for disbursement:

On an average, loans are disbursed within 3-15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 15% of the cost has been paid up front to the seller of the property.

Joint applications:

Most institutions are willing to consider the joint incomes of the applicants for deciding the loan amounts. Some institutions do not require the co-applicants to be co-owners of the property to be purchased.

Documents Required at the time of Application:

1

Latest salary slip (proof of income for salaried individuals)

2

Photographs

3

Proof of age

4

Identity papers

5

Proof of residence

6

Bank statements for the previous six months

7

For self employed, certified copies of balance sheet, profit and loss   statement and tax challans for the previous 3 years

8

For partnership/private limited companies, the Articles of Association, partnership deed and details about the firm

Before actual disbursement:

Before disbursement all documents pertaining to the property, including the agreement for sale is required to be handed over to the lending institution.

Types of Home Loans available :

Some Home loan FAQs:
 

What is EMI ?
EMI is the Equated Monthly Installment payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal.

Rate of Interest?
Interest rates are different from institution to institution and generally range from about 12.5% to around 16%. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance.

Monthly reducing
In this system the principal on which you pay interest reduces every month as you pay your EMI.

Annual reducing
In this system the principal is reduced at the end of the year, thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. Which means the EMI for the monthly reducing system is effectively lesser than the second system of calculating interest.
The best way to select the cheapest Home Loan is to keep the loan period constant and calculate the total amount paid for the home through the different loan options available.

What are the repayment period options?
Repayment period options range generally from 5 to 15 years.

What is fixed rate of interest?
Some institutions have a fixed rate of interest which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.

What is floating rate?
This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.

Other costs that usually accompany a Home Loan:
Home loans are usually accompanied by the following extra costs:

a) Processing Charge: it’s a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount received by you cannot be less than the processing fee.

b) Prepayment Penalties: when a loan is paid back before the end of the agreed duration a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre paid.

c) Commitment Fees: some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

d) Miscellaneous costs : it is quite possible that some lenders may levy a documentation or consultant charges.

e) Registration of mortgage deed.

How do HFCs decide what amount your loan should be?
Usually most companies give upto a maximum of 85% of the cost of the house. The other 15% sometimes called ‘seed money’ will have to be provided by a loan applicant. Out of the 85% the amount the applicant is eligible for, is decided by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.
Securities required:
In most cases the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts, share or savings certificates.

Guarantors:
Some institutions ask for 1 or 2 guarantors, others require no guarantors at all.

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