by teamrecGetting a home is every Indian’s dream and getting a home loan is a lengthy procedure. It might look simple in the bank’s advertisement, the fact remains that there are a lot of hiccups in the entire process. The objective of this article is to ensure that your home loan becomes a hassle-free experience.
Applying correctly
Strange but true, many of the home loan applications are out rightly rejected due to incompatibility between the borrower’s qualifications and lenders requirements. It could be the age criteria, income criteria, proper documents not being submitted, the bank not being able to verify your details properly, and many more. The best way to avoid being rejected in this way is to check the eligibility requirements of lending banks carefully and to apply only to that bank which matches your profile. Keeping proper documents ready and providing accurate, verifiable details to the banks will ensure that you sail through the preliminary verification process.
Processing Fee
A bank requires about 0.25% to 1% of the loan amount to be submitted as the processing fees with every application. This processing fee is generally not refundable. If in any case, the bank you have applied to states that it will refund the processing fees in case the bank doesn’t sanction you the home loan, it is better to get any such declaration in writing and make sure that the clause is enforceable.
Loan Amount
Many things come into picture, when the bank decides how much home loan a person can get. The monthly income, financial history, other unpaid loans with the borrower, past repayment record, credit card usage history if any, bounced checks, average balance with the banks, continuity in present employment, total years in employment, nature of employment etc. These factors all clubbed together help the bank to decide whether it will be able to recover its money satisfactorily or not. You can increase your eligibility by clubbing together your spouse’s, father’s, son’s, relative’s income and make them a co-borrower. In addition to it, if you have sufficient funds in saving instruments you can keep them as collateral and ask the bank to finance your home loan.
Interest Rate: Fixed / Floating
Even after deciding on a particular loan regime, the home loan terms and condition fine prints can create havoc with your interest rates. For example even if a borrower has opted for fixed rate home loan, the catch is in the fine print which authorizes the bank to vary this fixed rate every 2 years. Similarly if the bank doesn’t pass you the benefit of lowered interest rates in floating interest rate regime, it will be of a little value. Avoiding such a situation essentially means that you study the terms and conditions of home loan carefully and clearly ask the bank about such things.
Property valuation
The bank has its own experts for legal, technical and financial appraisal of the property in question. It evaluates the property on its own established parameters and assigns a value to it. This can cause a significant gap between what you need and what the bank is willing to lend. To avoid this situation the borrower can get the property valued before applying for home loan from a bank approved valuator.
Down payment
Banks require the borrower to fund at least 10% to 40% (varying from bank to bank) of the entire loan amount as the down payment for the home loan. This amount has to be deposited before the disbursal of the home loan. It is generally a good procedure to check the down payment requirement of various banks and choose the one which requires the lowest amount to be deposited initially or fits your budget well.
Documentation Problems
The title deeds and NOC documents have to be furnished in the bank’s format. To avoid falling into uncomfortable situation, enquire about all the documents required by banks beforehand and take necessary steps to get them ready within the stipulated time frame.
Conclusion
The above mentioned problems are very common, but can be easily avoided if the borrower follows proper procedure, prepares adequately before applying and takes care of correct documentation.
