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Are you confused about the home loan process in India? Well, we have got you all covered! Home loan processes in India help millions of people to buy their dream homes and property. However, not everyone is aware of the proper home loan process in India. Meanwhile many home loan applications get rejected consecutively and buyers happen to find themselves in tricky situations where they give up or can't pay their loan in the end. So here is the full guide to knowing about the best housing loan in India processes.
Home loans are given by HFC or housing finance Companies to buyers in exchange for EMI. The home or the property which is purchased by the buyer acts as collateral until the buyer pays the full moon. Proper verification is done for the property as well as the buyer before the lawn. In addition, The loan verification for the buyer is also done. In simple words, the home loan process in India is complex and therefore must be understood carefully.
How does the Home Loan Process Work in India?
Here are some pointers about home loans in India and how they begin:
● Banks assume that 50% of the income of the buyer is available for repayment of the loan. So a higher income can make a buyer eligible for higher loan possibilities.
● A down payment is expected by the buyer for the lander concerning 10% or 20% of the property price. The financial amount also includes the registration process, stamp duty charges, and transfer process.
● The buyer is responsible for informing the banker about the investment type they desire. This is because the investment depends upon property prices which are sometimes fixed and sometimes floating.
● The home loan also includes additional charges. These additional charges consist of registration, technical evaluation, scrutiny charges, legal documents, and others. Some lenders might also waive these additional charges.
● During the India home loan disbursement process, there are a few documents that are necessary to be submitted. These documents include agreement papers, encumbrance certificates, title papers, and allotment papers.
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● During the first year of the loan, lenders give a statement to borrowers or buyers about how much principal as well as interest the borrowers are expected to pay.
● During the last year of the loan lenders providers' statement shows the actual principal as well as interest paid by the borrowers. This data is used for the purposes of tax.
● Higher prepayment can result in greater savings during home loan payments. Partial prepayment can result in reduced total principal as well as interest outgo.
● A loan can be pre-closed before the date of its tenure. No charges are applied if the interest rates are constantly changing. In addition, charges might apply if interest rates are fixed.
● Follow the home loan processing steps given below:
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Steps to avail of a Home Loans
Here are the steps to get home loan:
● Apply: a formal application is applied to the bank for a home loan. A few documents are required such as identity Proof address proof bank details employment details age proof and others.
● Processing fees: loan processing fees are generated by the bank and are non-refundable. GST is also charged on these fees.
● Verification: verification is the next process after applying for the loan and processing of loan fees. In this process eligibility for a loan is determined. Representatives of the Bank visit your home and work area for verification. The credit history of buyers is also checked.
● Evaluation: verification is the most important part of the loan process in India. Depending upon the ability to pay the loan that application can be accepted or denied.
● Offer letter: offer letter is given by the bank and contains information including Loan tenure, Mode of repayment, interest applicable, Sanctioned amount, Special scheme, Rate of interest, terms, and conditions. A signed copy of the offer letter is submitted to the bank.
● Property verification: before the bank branches the loan a property verification is done by their representatives in which all documents of property can be asked for. Evaluation of property such as ownership quality of construction and other factors are checked by the bank.
● Home loan: the process of granting a home loan begins after the successful finishing of the above processes. A loan agreement is to be signed by the buyer to continue the process of home loan disbursal. Depending upon the above factors the loan amount will be determined by the bank. This is how home loan works.
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How is your Loan Borrowing Capacity Determined?
There are a few factors based on which loan borrowing capacity is determined. These factors are:
● Salary: loan eligibility is highly determined by the income of the buyer. In addition, bonuses and other perks of salary are not considered a part of the buyer's salary. Loan eligibility can also decline if these factors do not contribute to the consistency of your salary. Fixed pay as the income is considered only.
● Age: age is an important factor in determining loan borrowing capacity in India. Most of the banks consider 58 the maximum age while paying the last EMI of the loan. A person around 50 is given 6 or 8 years of tenure while a person around 30 years old can be given 20 years of tenure.
● Liability: liabilities of the buyer can include loans taken from other banks. It should not exceed 55 to 60% of the buyer's monthly salary or income.
● Cash flow: most banks typically assume that 40 or 50% of the buyer's income can contribute towards the payment of a loan. The monthly expenditure of the buyer plays an important role in determining the quantity of loan that can be given. Based on the cash flow the rate of EMI is determined to repay the loan.
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How to calculate EMI (Equated Monthly Installment)
There are two factors that determine EMI. These factors are the principal amount of the loan as well as the interest applicable to the loan. Hence the total EMI is calculated by adding the principal amount of the loan and the interest applicable to it. The EMI is paid on a monthly basis and is fixed until the period of tenure. In addition, a home loan EMI is the EMI that has to be paid to repay a home loan. The tenure of a loan also plays an important role in the calculation of EMI. in other words, tenure is inversely proportional to the EMI. If tenure is longer to repay the loan, monthly EMI can be reduced.
A simple formula to calculate EMI is [P x R x (1+R)^N]/[(1+R)^N-1].
Here, N is the number of years, P is the principal loan, and R is the rate of interest.
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How to get a Home Loan from different Banks in India?
Here are a few pointers on how to get housing loan from bank in India:
● Home loan eligibility is essential to check.
● It is important to have a good credit score.
● All relevant documents should be ready.
● The charges and fees should be understood properly.
● Research the market carefully and choose a proper lander.
● Repayment of loan should be planned in advance.
● Check the rates of loans in different banks and look for the one which provides the lower rates. Search for special schemes they provide.
● You can apply for multiple loans at the same time from different banks.
● Before getting a home loan check for some requirements such as fees, registration, balance transfer facility, foreclosure, prepayments, etc.
About Author
Jatin Dubey
An enthusiastic content writer who is a law graduate and has been working as Real Estate Consultant for around 9 years.
He has worked with top Real Estate Agencies and Builders in Delhi, Bangalore and Pune. His skills to perform market analysis and explore high potential localities has helped many clients in the past.
An enthusiastic content writer who is a law graduate and has been working as Real Estate Consultant for around 9 years.
He has worked with top Real Estate Agencies and Builders in Delhi, Bangalore and Pune. His skills to perform market analysis and explore high potential localities has helped many clients in the past.
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