Home loan: How to get a home loan: Everything you need to know about eligibility, documentation, cost

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Buying a home involves pooling substantial funds. In times of crisis, people usually resort to home loans which can be obtained at a relatively low interest rate compared to other personal loans. The home loan converts the outstanding amount plus interest into EMI.

Check eligibility

One can check their eligibility for the loan amount using online eligibility calculator tools on the basis of the nature of their occupation, income, etc.

Documentation

A loan application form must be completed with identity, address and income documents. Income documents may include payslips, ITR form, bank statements, etc. Details of the outstanding loan (if any) and ownership are also required. After physical inspection of the property and verification of the borrower’s credit rating, a loan sanction letter is issued.

Loan agreement

If the terms of the approval in principle are acceptable to the borrower, a loan agreement is entered into between the borrower and the lender. It is mandatory to submit original property papers at the time of loan agreement. Stamp duty for the loan agreement is charged at 0.1-0.2% of the loan amount.

Disbursement

In the case of a property under construction, the disbursements are linked to the progress of the work. However, for a ready-to-move-in property, the total amount can be disbursed and paid to the seller at once, after verification.

Cost

A loan processing fee is charged by the lender and must be paid at the time of application submission.

Points to note

  • Home loan sanction letters usually have a validity period of six months, before which the property must be purchased.
  • A home loan insurance must be taken out by the borrower.

(Content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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