Home loan is a long term financial commitment. And therefore before applying for a home loan it is important that you gain the required knowledge to avoid facing difficulties later and refrain taking wrong decisions. By knowledge it means knowing the home loan process, its time duration, list of documents required, charges involved, OCR contribution, lending criteria, eligibility norms, understanding the importance for property legal and technical, etc. Insufficient information on this may create frustration and may hinder the smooth processing for the loan causing unwanted delays in the process. Also at times missing out on disclosing important information to lenders- banks/NBFCs may also result in unwanted loan rejections. It is therefore important to be true to the lending institutions if you wish to have a hassle free loan processing of your housing loan.
The process for applying a secured loan like a housing loan is a time consuming process and it takes nearly 15-20 working days for a loan to get disbursed. Below mentioned are some of the vital aspects you must know before applying for a housing loan.
1- Importance of Pre-Sanction Loan.
Do not commit mistakes like Mr. Roy, who booked a property valued at 1cr while his loan eligibility stood only at 60lakhs. Frustrated, Mr. Roy kept running to the lenders but finally faced rejections from all lenders. Unlike Mr. Roy, it is important that you know your loan eligibility prior before finalizing the property. The most convenient way to know your exact eligibility is to apply for a pre-sanction loan. A pre-sanction loan refers to a loan sanctioned to you only on the basis of your financial credentials. It holds validity for 6 months. The lender might charge you a nominal fee for a pre-sanction letter. A pre-sanction reduces your chance of ineligibility and you exactly know how much loan you can draw and which property you can afford to book.
On receiving the sanction letter the first thing you need to do is read the page for any special terms & conditions. These special conditions are referred to as PSD conditions on which the lender agrees to sanction your case. Say for example: account opening, loan closure conditions, LTV percentage, repayment conditions or case-specific conditions such as latest salary credit, updated bank account statement,co-applicant addition, etc. which are written by the credit manager. If you disagree or wish to sort any clarification on the mentioned terms & conditions coordinate with the sales manager.
Additional Read: How To Read Home Loan Sanction Letter Of Bank.
2- Emphasize on written communications.
Do not trust the verbal promises made by the sales team. At times it may be a gimmick to increase their sales number. It is therefore important that you insist on having written communications especially via electronic mails over verbal conversation regarding the loan processing, documentation required, total loan processing charges, etc. along with any waiver promised on fees or documentation.
3- Maintaining transparency.
Maintaining utmost transparency with the bankers will result in quick and smooth processing for your loan application. It is expected you disclose all the relevant and important information to the bankers which is crucial for the loan application such as your job credentials-profile/job change/job loss/demotion/promotion, income credentials-increment/bonus/perks/salary cut, CIBIL score, co-application information, credit card overdue, loan default, delayed payments, EMI bounces, property related issues-title issues/transfer issues/unavailability of property papers, etc. Miscommunications, misleading information or missing out the vital information may cause unwanted delays in processing and increases the chances of loan rejections. The most common thing observed is not talking about your CIBIL score. By hiding your low CIBIL score does not mean your lender will not come to know. The lender only after scrutinizing your CIBIL and past repayment track records approves your housing loan. (Read more on CIBIL And Its Significance In Home Loan).Any lame excuses for the low scores are not justifiable and therefore it is important you give accurate information to your bankers which will save precious time for both.
Also give clarity to the lender of your intentions (if any) to apply with multiple banks to secure low interest rate housing loan. This creates an opportunity to bang a home loan with low rates.
Additional Read: Know How Your Home Loan Inquiry Impacts Your CIBIL Scores
4- Loan processing charges.
Know all your loan processing charges till disbursement well in advance. Take a written confirmation from the banker through email on the various charges for your loan processing. Most of the heating arguments with the bankers occur only due to the non-clarification on the fees charged. It is therefore important that you remain updated with all such charges involved till disbursement which are processing fees + applicable GST, administration cost, legal and technical cost, stamp duty, franking, resale affidavit, MOD charge, etc. (read to get detailed information on costs involved on- DON’T GET FOOLED !! MUST KNOW ALL COSTS IN HOME LOAN). Keep an official record of the various cash back and fees waiver offers from the lender (if any). This will ensure the lender values his promised offers.
5- Property Documentation
It is unusual that you have an in-depth knowledge on all property papers unless you are a person of the same field. This many times is a cause of the problem especially in the case of resale property purchase. The builder properties on the other hand have simple documentation – agreement copy, OC and CC + approved plans & builder NOC which are the only documentation required to disburse a builder case home loan. The resale transaction however involves an additional set of documents apart from the agreement, OC/CC and the plan copy, the list of which is mentioned below.
i) Set of prior chain of agreements
ii) OC copy
iii) CC + Plan Copy
iv) Society Registration Copy
v) Share Certificate
vi) Title Search report (to be done before purchasing a property)
vii) 7/12 of the property
viii) Encumbrance Certificate
ix) For CIDCO/MHADA property
- Copy of conveyance deed, original NOC & transfer letter from CIDCO/ MHADA – If conveyance deed is executed.
- Copy of tri-party agreement & lease agreement – If conveyance deed is not executed.
Unknown to the documentation, sometimes you proceed for registration without actually knowing the property’s track record and the ownership titles. Any discrepancy in the property papers will reject your home loan application on legal grounds. It is therefore suggested to get the legal and technical done for the property before finalizing the same. Only after legal and technical clearance of the property it will be safe for you to invest your lifetime earnings.
6- Importance of RERA and APF in builder property.
RERA stands for Real Estate (Regulation And Development) Act. It was introduced to safeguard the interest of the home buyers. The RERA registration is mandatory for all builders. Therefore look only for the RERA registered projects and builders, this will safeguard you against the malpractices of price exploitations and delayed possessions.
APF stands for Approved Project Financials. The lender banks/NBFCs provide APF to the developer/project owner/builder who has all the necessary approvals for their project. The APF approval is provided after the clearance of the mentioned documents from the builders which are legal papers, government clearance, title deeds, approved plans, sale deeds, land approvals from the concerned authorities, clearance from forest/pollution/electricity and fire, etc. The lender then issues a APF number to the developer/builder. The APF ensures the credibility of the builder and provides surety that your investment is safe and guarantees the timely possession of the project.
7- Payment towards property TDS
In resale property purchase, you (the buyer) are liable to pay 1% TDS on the total sale considerations above the value of Rs.50lakhs (TDS is not applicable for sales considerations below Rs.50lakhs). The TDS amount is to be deducted from the sale consideration payable to the seller of the property and is deposited in the government’s account as per the income tax act by filling form 26QB for online payment of tax on the e-tax payment portal of the government. A downloaded copy of the submitted form 26QB is mandatory to disburse your loan, which needs to be submitted to your lender.
Since the TDS amount is deducted from the sale considerations payable to the seller, the said amount can be clubbed to your OCR- i.e. own contribution amount.
If your seller is an NRI, you have to deduct a TDS of 20%-30% on the total sale consideration from the amount payable to the seller. (for more information on NRI home loans read “Everything You Must Know About NRI Home Loans”)
8- Understanding Pre- EMI
You need to repay your housing loan through equated monthly instalments auto debited from your bank accounts. The lender offers you a choice to select the EMI dates either 1st, 5th or10th of every month. If your housing loan is disbursed on any other dates other than the dates of EMI cycle, the lender will charge you per day interest on the loan amount till your EMI date. Say for example, if your loan is disbursed on 25th June and your EMI date is 5th, then you will have to pay interest to the lender from 25th June to 5th July on the total loan disbursement. This interest charge is termed as Pre-EMI.
Additional Read: IS PRE – EMI BETTER THAN FULL EMI. FIND OUT YOURSELF.
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About Loanfasttrack– Loanfasttrack is a Mumbai based loan provider company since 2015 offering loan services in Mumbai on– housing loan in Mumbai, mortgage loan in Mumbai, personal loan in Mumbai, business Loan, unsecured business loans, home loan transfer, top-up loans, car loans, educational loans and loan transfers.
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