First Time Borrowers

Has buying a new home been on your agenda for a while now? Well, if that has been

so, then this is the most suitable time to buy one before the prices go through the roof.

The reason being that the interest rates have been on the rise and are likely to get

steeper in the near future. Thus, don’t delay any further. So how to go about it? The

process of buying a house involves several approaches and you can choose the one

which suits you best. In case you choose to buy your dream home through a home loan,

the best bet would be to opt for the teaser loans being offered by only a few banks

where you get to avail a fixed EMI for the initial 13 to 36 months depending on the bank

you choose. Apart from that, there are normal home loan products categorized as–

1. Floating home loan interest rate: It keeps on changing as per the change in

   base rates or the Benchmark Prime Lending Rate (BPLR) ; as the case may

   be.

2. Fixed home loan interest rate product: There are of 2 types :
   • The interest rates are fixed for the entire tenure. In such a case, you will have a fixed EMI for your housing loan throughout the entire tenure.
   • The interest rates are fixed for a certain period of time. In this case, the interest rate is fixed only for a stipulated period, say 6years, after which the bank can change it’s interest rates every 6 years.

Already Existing Borrowers

If you are an existing home loan borrower with a proper track record, there is a better way to streamline and manage your home loan with ease.

• You can migrate to a teaser rate scheme.
• You should also shift from the old BPLR system to the new base rate regime. You will need to apply to the concerned bank for the change of the base rate as it is not automatically applicable to the existing users. This lends more transparency than the system of fixing up BPLR.

Thus, by making a transition from your existing home loan to a base rate system will be much more beneficial to you than staying in the old BPLR system.

Home Loan Application Process – How to Avail a Home Loan?

Applying for a home loan can be quite an unnerving task especially if it’s the first time you are applying for any loan. Ignorance is certainly no bliss here; on the contrary without the right information and proper awareness, the entire home loan experience can turn out to be quite unpleasant and also burn a hole in your pocket.

To save you from all that trouble, Akshara group lays down a Step-by-Step Guide so that you can’t go wrong. Read on and equip yourself with the right information about Home Loans and what to expect.

Application Process for Home Loans involve the following steps.

1. The Application Form
2. Personal Discussion
3. Bank’s Field Investigation
4. Credit appraisal by the bank and loan sanction
5. Offer Letter
6. Submission of legal documents & legal check
7. Technical / Valuation check
8. Valuation
9. Registration of property documents
10. Signing of agreements and submitting post‐dated cheques
11. Disbursement

1. Applying for a loan

The first step is to fill out the application form. The look and feel of the Home Loan Application Form will vary from bank to bank. However, about 85% of the required information is the same across all banks. Basically, most of the information pertains to your personal, professional and financial details which also include your assets, liabilities and estimated cost for financing the finalized property.

What are the Documents to submit?

While submitting the Application Form, several documents are required by the bank. The following documents are generally required to be submitted

1. Proof of Income: Your income needs to be substantiated with proof as follows:
   • Copies of last three years’ Income Tax returns (along with copies of Computation of Income/Annual accounts, if any),
   • Form 16/Form 16A
   • Last three months’ salary slips
   • Copies of the last 6 months’ statements of all your active bank accounts in which your salary/business income details are reflected, etc.
   • Other documents that you need to provide with your application form include age proof, address proof and identification proof.
   • You may also need to provide your employment details.
2. Age proof: Copy of your school leaving certificate/Passport/ Driving Licence/Ration card/PAN card/ElectionCommission’s card/etc.
3. Address proof: Documents like Passport/ Voter’s ID Card/ PAN Card etc. need to be furnished to prove that you are actually residing at your current address.
4. Identification proof: Same as the above, but with your photograph as well. Sometimes, a single document having your photograph, age, and current residential address can suffice as proof for all the three things.
5. Your employment details: Generally, banks cross-check your employment details from the standard website of your company that exists. However, if your company is not well-known, then you may need to furnish details about the same which include a brief about it’s nature, business, turnover, profit, clientele , competitors etc.
6. Financial Scrutiny: Before the bank or lending institution sanctions your home loan, it makes a careful assessment of your financial status based on the all your income related documents, disclosure of assets, liabilities and any other ongoing loans that you submit.Your bank statements are meticulously scrutinized for the following:
   1. Level of activity Especially for self‐employed people, this gives a very good insight about the extent of their business activities.
   2. Average Bank Balance – Your spending and saving habits are studied from a simple cursory glance at the average balance maintained in the savings bank account which speaks volumes. This study provides them an insight about your ability to repay the loan.
   3. Number of Cheque Returns – lf the bank statement reflects a debit of a small charge, it indicates that a cheque issued by you was returned by the bank and known as a Cheque Return. Multiple cheque returns can hamper the process of your loan sanction.
   4. Cheque Bounces - When cheques deposited by you are turned down or returned by the issuer’s bank then it will reflect in your statement. Generally, banks have specific norms as to how many such returns they will entertain with a stipulated period, say, a year.
   5. Regular periodic payments - Banks look for periodic payments that you make to other finance institutions or banks, indicating any existing loans or liability. Should there be any, you will need to furnish complete details to your Home Loan lender to whom you have applied.
   6. Nature of Your Investments – Where you make your investments and how you manage them is also examined in thorough detail, letting the bank estimate about your ability to make the down payment and also gauge your saving habits.

The Processing Fee

In order to process the application form and the credit documents, the banks charge a processing fee which varies from bank to bank and is usually around 0.25% to 0.5% of the total amount. Example: If you apply for a loan of Rs. 20 lakh, the bank charges you around Rs 5000 to Rs. 10000. Besides, the amount that you pay also somewhat determines how much commission the agent (who is helping you out with the dealings) gets from the bank.

Despite the fact that most banks have flexible fee structures, yet it is recommended that you find out for yourself about the banks’ minimum possible fees. Getting a loan without any upfront fee is quite unlikely though, but nevertheless some banks so have the provision of zero upfront fee loans where those benefits are often compensated with higher ‘other charges’ like ‘stamp duty’ and ‘legal charges’.

The purpose of collecting this fee is to maintain your loan account, and also takes into account work like routinely sending Income Tax certificates every year, maintenance of post‐dated cheques and so on.

Handy Tip

When you apply for a loan, it is always advantageous to keep copies of your income proof handy. If you are a self‐employed person and if your income reflects an unusual increase compared to the past, then be prepared with a justifiable explanation to back up the same. The bank or the lending institution would like to find out that such an increase is a permanent increase in your income and not just one‐time anomaly which can not only fizzle out but might also be reversed in later years. If the bank is satisfied and convinced with your explanation, then the sanctioning of the loan is facilitated based on the latest higher income in comparison to a lower average income.