Buying a home is probably the most significant financial commitment for the majority of us. As a result, a methodical approach is required to make the entire home-buying process simpler and less stressful which it already is. Millions of urban Indians have been taking advantage of home loans to buy their dream homes. However, there is still a section of people that aren’t familiar with the home loan application process. As a result, many HDFC home loan applications are denied, or borrowers find themselves in a difficult situation to negotiate the HDFC home loan interest rate due to not having knowledge about how to do so. It is best if you conduct thorough market research to shortlist from where you want to get your loan- from a bank or Housing Finance Company (HFC) or Bank. Consider this post as a comprehensive guide to understanding how to go ahead with the home loan process in India.
What exactly is a Home loan?
A home loan is essentially an amount lent to individuals by banks or Housing Finance Companies (HFC) and borrowers are required to pay the EMI as decided by the lender. One should understand that the homebuyer purchases the property with the HDFC home loan amount disbursed; however, the property remains collateral with the bank until the loan is fully repaid.
Nonetheless, before the funds are released, banks thoroughly investigate the borrower and the property. They also assess the homebuyer’s loan eligibility on the basis of certain parameters, and even the smallest financial discrepancy can cause problems in approving your loan application process. As a result, the home loan process is complicated and must be thoroughly understood.
Important Aspects to Know About Home Loan Process
Few of the aspects to know about HDFC home loan that not many know about are listed below:
- Most lenders require a down payment of 10-20% of the home’s purchase price from the borrower. The lender finances the remainder of the property’s value (80-90 per cent). Registration, transfer, and stamp duty charges may also be included in this financed amount.
- HDFC home loan interest rate can be fixed or variable. You must notify your banker of your
preferred ‘interest type.’
- Aside from your EMIs, a home loan also includes fees such as a processing fee, a technical evaluation fee for high-value property loans, and legal document scrutiny fees. Some lenders, however, may waive these fees.
- You must submit an allotment letter, title deed, encumbrance certificate, and agreement papers at the time of loan disbursement.
- And rest assured, Borrowers receive a statement from their lender at the start of the first year of the loan that shows how much HDFC home loan interest rate and principal they are expected to pay. Lenders provide a statement at the end of the year that shows the actual interest and principal paid. This information is used to submit tax returns to the ITR.
- Partially prepaying your HDFC home loan reduces the outstanding principal amount, resulting in lower interest payments thereafter.
How to go ahead with a home loan?
The procedure for obtaining a home loan from a bank or a housing finance company is outlined below.
Submit a home loan application process: A home loan application begins with a formal application to the bank. Furthermore, you must provide your personal information to the bank so that it can scrutinise and assess your loan eligibility. Most banks will typically request the following documents:
- Identity verification
- Address Verification
- Age verification
- Proof of educational/professional credentials
- Details about employment
- Account statements
- Income documentation
- The Pan Card
- Particulars of the property (in case it is finalised).
Loan processing fees must be paid: A non-refundable loan processing fee will be charged by your bank. As for processing fees, most banks charge between 0.5 per cent and 2 per cent of the loan amount. In addition, you will be charged an 18% Goods and Services Tax (GST) on the fee. This sum is used by banks to initiate and administer the home loan process. You can try to negotiate with your bank to get the benefit. However, one must know that not all banks will be willing to waive the processing fees.
Verification of the applicant: The bank will evaluate your case and determine the amount you are eligible for after you have submitted your loan application and processing fees. You will be required to meet with bank officials in person, usually within 2-3 working days of submitting your application, so they can assess your eligibility such as repayment capacity. Following the personal interaction, the bank will verify all of the information and credentials you provided in your loan application. Bank representatives will visit your place of employment and residence to verify the information you provided in your application.
Assessment of repayment capacity: The most important aspect of the home loan process is the verification of the borrower’s repayment capacity. The bank may approve or deny your home loan request based on its assessment of your ability to repay the principal (plus HDFC home loan interest rate) on time. They will also examine your CIBIL score to assess the same.
Offer letter for a home loan: At this point, the bank drafts an offer letter that includes the following information:
- Amount sanctioned
- applicable interest rate
- HDFC home loan interest rate, fixed or variable
- Loan term
- Repayment mode
- Special plan (if applicable)
- Terms and conditions of the loan
If you accept the terms and conditions of the offer letter, you must submit a signed acceptance copy to the bank. An acceptance copy is essentially a duplicate of the offer letter that the bank keeps for record-keeping purposes.
Property confirmation: The bank will verify the property in question before disbursing the loan. Original copies of the title deed, no objection certificate, and any other documents requested by the bank will be required. A legal check will be performed on the property to ensure that the title is clear and that no disputes exist.
The bank will also conduct a technical valuation of your property. In the case of an under-construction property, the bank will examine the project’s location, quality, and progress, and will evaluate the property.
Note: Please keep in mind that your home loan is a secured loan, with the property itself serving as collateral. As a result, your documents will only be returned to you after the entire loan amount has been repaid.
Disbursement of a home loan: The registration process for the home loan begins once all of the aforementioned formalities have been completed. The legal documents must be prepared on stamp papers of the required denominations in a format approved by the bank’s lawyer. Following that, you must submit post-dated cheques for the agreed-upon term and sign the home loan agreement.
After you sign the HDFC home loan agreement, the process of disbursing your home loan will begin. Your bank will disburse the loan amount based on the type of disbursement agreed upon (whether lump-sum or in stages).\
This serves as a comprehensive guide but it is best to meet with a bank or HFC officer to understand documentation requirements and processes. Last but not least, it is recommended that you insure yourself through a policy that is best suited to protect your family from any unforeseen risk.