Purchasing a home is considered one of the most important life decisions. Now availability of Best Home Loan Interest Rates by most lenders including SBI home loan, purchasing a home has become way easier. As buying a home requires great investment, availing home loan too requires massive long-term commitment to timely repay your dues.
Before home loans were introduced, individuals used to save for many years and depend upon unrecognizable lenders to avail loans during the time when required. However, with the evolving times and tighter regulations in place, a lot have changed in the industry.
Now you can avail home loan at best home loan interest rates in the industry with a lot of reliability and transparency. However, to make the correct decision when it is about home loan, it is crucial for you to understand how home loans function in India. Here in this guide, checkout all about home loans – how do they function, what must you keep in mind while availing a SBI Home Loan, how to repay your home loan on time without any bad experience. Read on to know:
What is a home loan?
A home loan is a fund that is availed either by banks or HFCs (housing financial companies) to buy a property.
How does home loan function in India?
Home loan amount borrowed by individuals is paid to the builder or owner directly by HFCs or banks. The borrower is then required to pay the loan proceeds in the form of EMI over the chosen repayment tenure along with the interest on top of principal. For example, if a home loan of Rs 25 lakh is available for a repayment tenure of ten years at a rate of interest of 9.55 per annum, then it will require you to pay an EMI of Rs 32,418. Also, the computation shows that the home loan will attract a rate of interest of Rs 14 lakh over the principal of Rs 25 lakh. This makes the overall outgo Rs 29 lakh over a tenure of 10 years.
Listed here are few of the crucial aspects that you must consider when availing home loan:
- Property on which the loan option is provided is taken as security by the lending company.
- Property can be residential or commercial
- In case the borrower is not able to repay the dues, the lender has all the legal right to recover the rest of the amount by auctioning the property.
Step by step process for home loan application procedure
Here’s a step-by-step process for home loan application procedure that can assist you get your journey started-
Submit the loan application
This is the initial step in the home loan application procedure. As per this step, you are required to place the loan application with the basic info. Information required involve the listed steps:
- Personal details like contact details, name, residential address etc.
- Income details such as annual income
- Education details
- Employment/business details
- Property details such as commercial/residential address etc.
- Estimated property cost
- Current means of funding the property
Info required at this process might differ from one lender to another. Additionally, alongside submitting the required info during application, you must also attach the essential document to authenticate the details submitted as application procedure. Home loan documents required at this process include:
Ø Identity proof
Ø Age proof
Ø Income proof
Ø Address proof
Ø Education proof
Ø Employment proof
Ø Property details
- Pay the processing charge
Once your application is placed, it is crucial to pay the loan processing charge. Again, the processing charge might vary from one lender to another. Typically, the processing charge for home loans differs from 0.25 percent to 1 percent of the loan proceeds. Processing charge is the amount that the lender collects to maintain the loan account. This amount might include commission to be paid to the agent. You also can negotiate with the lender for a better deal on the processing charge.
While NBFCs and banks have set a form of structure for computing the processing charge, there is zero harm in trying your luck with the request to lower the processing charge. In case the lender is proving zero processing charge, do ensure to compare the interest rate, duties and other fees that are involved that makes your loan cost you more.
- Discuss with the home loan lender
Here in this stage, you submit your documents, and they are verified by the lender and a formal discussion happens. It generally takes one to two working days or even less if the submitted documents are in order. There are few lenders which want you to pay a visit to the bank branch for the loan discussion and discussion of other terms and conditions. Few lenders are generally comfortable discussing such details and collecting the additional info linked with you. Doing so allows you to know your eligibility concerning home loan and that should you apply now or wait for some time.
- Wait for document verification
It is crucial to understand that various customers place applications for home loans daily. For fast processing of your application, it is crucial to have your paperwork in order. At this point, the lender verifies the details placed by the applicant.
Generally, the listed documents are authenticated by the lender:
- Residential address
- Employer details
- Employment details
- Residence contact number
- Workplace phone number
The above details are verified to make sure all your contact numbers and details provided are in order.
Get the loan approval
It is a crucial process where the lender must decide to either accept or reject the loan offer. It is known as sanction or approval of loan application. To approve the home loan, the lender ensures to perform an in-depth review of the application based on the listed parameters:
- Age and qualification of the loan applicant
- Employment details of the loan application and business details
- Applicant’s income details
- Ability to make loan repayments on time with the set interest rate
Depending upon the application analysis on the above-mentioned parameters, the lender decides the maximum loan amount you are eligible for. There are few cases based on which the lender puts few conditions which you must meet before the disbursement of loan.