My advice: Do not consider home as an asset, it is actually a liability. When one buys a home, he don't only needs to pay the EMIs but also the house tax and several other maintenance expenses which comes along with. However home loan provides relaxation in income tax but still the total of all other expenses is much high. If you're having or in future will be able to generate a fixed and good amount of cash flow in your account and budget books, buying a home is never like experience. The difference is as of dream and nightmare. A Good dream for persons with good planning and nightmare for those following the blind crowd.
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Having own home is almost everyone's dream and when we go to buy it, we are taking a big decision of our life. Home loan helps in turning this dream into reality. Here is the home loan process in India:
1. Loan application: The application requires basic information of loan applicant and the following documents to validate the provided information. Identity proof, Income proof, Address proof, Age proof, Education proof, Employment details, Bank statements etc.
The purpose is to find credit worthiness of loan applicant.
2. Processing Fee: is used by bank to initiate the home loan process and ranges between 0.25-0.50% of the loan amount. It varies on the bank and is non-refundable.
3. Evaluation: After applying and submitting the processing fees, banks starts evaluating the application, held meeting with loan applicant and evaluates re-payment capacity and loan security. It takes 2-3 days in this procedure.
4. Verification: Now they start verifying the documents and facts submitted during home loan application and personal interactions during evaluation. Banks may hire a third party vendor to cross check the references, documents and facts and also send the qualified representative for other verifications.
5. EMI payments verification: If the bank finds that applicant's income is insufficient to repay the loan amount, it denies the application. Applicant's capability is judged from his credit profile (if exists) and his income sources. Sometimes, based on how much a bank is satisfied with your repayment capacity, it may issue a conditional or unconditional sanction letter. In case of conditional sanction, one will need to fulfill the requested conditions.
6. Offer letter for home loan: The bank then issues a offer or loan sanction letter which includes:
i) Amount of home loan,
ii) Interest rate applicable,
iii) Type of interest rate (Fixed/Floating)
iv) Loan tenure
v) Mode of repayment
vi) Special Scheme, if applicable
vii) Terms and Conditions
Now ball is in court of loan applicant, whether the offer is attractive to him or not, if yes then he has to provide an acceptance copy to the bank. If the bank charges any administrative or any other fees, they have to clearly mention it here.
7. Verification of property: The property for which home loan is to be issued is verified. The title deeds, No Objection Certificates, and other requested documents by bank are to be submitted in this part of home loan process. Then bank legally verifies the that property has clear title and loan amount is disbursed to right person for right reasons. For disputed properties, and unclear ownership titles banks refuse to disburse the loan amount. Bank also send qualified reality valuators to assess the value of property on various parameters(like location, area, stage of construction, process of construction, ownership, age of property etc.).
The whole meaning is to ensure that property has clear title and it technically meets the valuation standards of the bank.
8. Disbursal of home loan: Depending on home loan purpose and agreed type (lump sum or stages), banks disburse the home loan amount after some more but small formal and legal steps like signing legal documents (agreement between applicant and bank) prepared on stamp papers and giving post-dated cheques of all EMIs.
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