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A Buyer's Guide to Home Loan Process

Owning a home has always been an aspiration for every individual has at some point in life as it is certainly a great feeling to have a place to call your own.

With favourable real estate policies in place and home loans available at the all-time lowest interest rates, purchasing a home is certainly one of the best investments you can make.

If you’re a first-time homebuyer, you might be wondering about what all steps are involved in the home loan process. In this article, we’ll guide you step by step towards the same to make your home loan journey a hassle-free experience.

Step 1: Selection of Bank

The first and the foremost step involved in the home loan process is the selection of a bank or financial institute which will be your home loan provider. This is a very important step as you have to seek out the bank providing the best interest rate and also look out for the trustworthiness of the bank. It is important to look out for the service factor since you’ll be engaging with the bank for a long period.

Step 2: Fill in the application form

The next step is filling in the application form for your chosen bank which can be done online for almost all the banks or you can go to a nearby branch and apply. The application form will require basic information about the applicant which usually includes:

  • Personal Details of the applicant (Full Name, Mobile Number, Email etc)

  • Residential Address of the applicant

  • Monthly or Annual Income of the applicant

  • Educational Information of the applicant

  • Employment Details of the applicant

  • Property Details for which loan is being applied for (name, location, unit, size etc)

  • The Estimated Cost of the property

  • Means of financing for the property purchased

Step 3: Furnishing of Documents

Once you’ve filled in the application form, you are required to furnish a few documents for the successful application for the home loan. These documents help banks to authenticate the applicant, determine his/her financial health and also to derive the eligible loan amount for the applicant. The following documents need to be submitted by the applicant:

  • Applicant’s ID Proof having name and picture of the applicant which can include PAN Card, driving license, voter ID card, Aadhaar Card, passport or ration card if it contains the applicant’s picture.

  • Applicant’s Income Proof which includes Income Tax Return (ITR) for last 3 years, salary slips for last 6 months, bank account statement for last 6 months, form 16 or form 16A for last 3 months and other bank accounts’ details if any.

  • Applicant’s Age Proof which can be PAN, driving license, school/college transfer certificate, passport etc which discloses the Date of Birth of the applicant.

  • Applicant’s Address Proof for authentication of residential address. This can include Aadhaar, Driving License, Voter ID, Passport, Ration Card.

  • Applicant’s Employment Details which include company name, registered address, nature of the business, applicant’s employment history, designation, monthly/ annual salary etc.

  • Applicant’s Educational Proof which can include the certificate of highest qualification

  • Bank Statements of the applicant for the past 6 months to monitor the nature of transactions and if any loan is already associated with the account.

  • Property Details include the legal documents of the property for which the loan is being applied.

Step 4: Payment of the Loan Processing Fee

Once you’ve made the application along with furnishing necessary documents for the home loan, the bank will determine the amount of loan which you are eligible to apply for and the bank will disclose the same to you. You are free to choose the amount of loan you would like to apply which can be maximum up to the eligibility disclosed by the bank.

The next step is the payment of the processing fee. Banks usually charge about 0.25% to 0.50% of the requested loan amount, differing from bank to bank. It is better to know about the rate charged by the bank for loan processing upfront to avoid any confusion later.

Step 5: Valuation of the Documents

Banks usually receive thousands of home loan applications and while processing the same, they have to be very cautious that the applicant is completely genuine. To ensure the same, banks evaluate all the documents furnished by the applicant and conduct an audit of the application received. Furnishing any fake document is fraudulent activity and comes in the category of fraud.