Even though the lender -Bank/NBFC/HFC differ in their marketing style, advertisement approach with ROI (rate of interest) & PF (processing fees), etc., the internal home loan procedure remains the same with all lenders. Many of us are already aware of the loan process for various types of loans. But for those who are still unaware or have a fair knowledge on the home loan processing, here is a step-by-step guide for the internal processing of the home loan & mortgage loans.
1) Sanction Process– When a loan file is logged-in with the lender it passes through various departments before it gets finally sanctioned. No single person/desk carries out the entire process. In-fact the file is scrutinized by many hands before it is finally forwarded for sanction.
a) Initial Scrutiny of the documents & duly signed form. The login desk verifies for any incomplete documentation, highlights the list of pending documents, verifies the signatures on the form and then logins the file into the system while collecting the non-refundable login fees for the home loan/ mortgage loan.
b) The login desk then makes a CIBIL check of the file. The CIBIL score of the borrower is then attached with the file. (Also Read – How multiple loan inquiries impacts your CIBIL score)
c) The RCU (Risk Containment Unit) team then checks for any fraudulent / forged documentation. The borrower’s KYC -pan card, Aadhar card along with the address proofs provided are counter verified with the government official sites. The RCU may sample the file from time to time if they doubt any suspicion in documentation.
d) The next is FI visit which is arranged at borrowers residential & official address mentioned in the application form. FI is the field investigation. A physical verification is done to verify the borrower’s details as mentioned in the loan application such as his personal details- family background, property details & employment details- designation, experience, etc. A FI desk then sends the FI report to the loan department. The FI is conducted by the lender’s internal team. A positive FI report is crucial for sanctioning the home loan / loan against property while a negative FI will reject the loan application.
e) Along with all the remarks from FI desk, login desk & RCU team the file is then finally forwarded to the credit manager, who is the authority for sanctioning the loan. The credit manager then analyzes the case, calculates the home loan eligibility / mortgage loan eligibility taking into consideration the factors such as risks involved, FOIR (fixed obligation against income ratio), LTV (loan to value) norms and then calls the borrower for a telephonic Personal Discussion to authenticate the borrowers loan requirement needs. On successful discussion the file is further forwarded for sanctioning to the higher authorities (of credit), who then gives their approval. The credit managers reserve the authority to approve or withdraw or reject the case at any stage of the processing if they aren’t comfortable with any information. (Must Read- How To Read Home Loan Sanction Letter Of Bank)
f) The approved cases are then sent for processing fees & rate approvals to the sales hierarchy. (Must Read- All costs incurred for availing home loan)
g) Only on receiving all the relevant approvals the final sanction letter is provided. Sanction letter is issued on the letter head of the issuing lender – Bank/NBFC. (Also read – Why Home Loan Interest Rates Of NBFCs Higher Than Banks)
On the other hand, with nationalized banks there are no such individual departments for loan sanctioning and the process is simple since the sanction process is single handled by a bank official. (Must read – Difference in applying home loan with public bank and private bank)
The turnaround time for a loan sanction is up-to 5-7 working days which further differs from lender to lender. The sanction letter is valid for a maximum period of 1 year, depending upon the lender Bank/NBFC.
Also Read: Pre- Sanction Home Loans
2) Technical Process– A physical inspection of the property is conducted to know the current market value & the age of the property so as to ascertain the lender does not over lend of the cost of the property. The property technical is again a process of 3-5 working days, and is usually carried out by the hired external agencies by the lender Bank/NBFC. The Xerox of the property papers i.e., the agreement copy, index 2, OC, property tax, CC & plan copy are given to these agencies to generate the technical. The generated technical report is handed over to the respective loan processing branch.
Many times the technical is initiated at the initial stage of the file login process. This helps to reduce the turnaround time of the loan process.
3) Legal Process – Such is the process which is to be initiated only after the loan is sanctioned. The legal of the borrower’s property papers is mandatorily carried out in order to ascertain the property’s clear title. A Xerox set of all of property papers (index 2, prior chain of agreement, OC, etc.) is sent to the property lawyers with whom the lender has a tie-up with who then generates the legal report for the property. The lawyer then arranges to send the legal report via courier to the respective branch. The entire legal generation is the process of 3-5 working days.
4) Disbursement Process – On the successful completion of all the above-mentioned processes, the last internal process is for the home loan / mortgage loan disbursement. A disbursement is the process of another 7-8 working days. A docket kit (lender’s disbursement agreement kit) is duly signed by a borrower and co-borrower. All original property papers along with the docket kit needs to be submitted to the lender. The lender ensures the borrower pays all loan charges such as processing fees, administrative- legal & technical charge, franking & stamp duty, etc. before the final disbursement of the home loan/ mortgage loan amount. The detailed disbursement process will be as below:
a) Docket Login. The duly signed and filled docket kit is login into the system. It is checked thoroughly. Necessary corrections are made if required.
b) A DM sheet is made. A DM is the credit sheet which is to be filled with the important details of the clients which includes filling his property details, cheque favouring details, cheque date, etc.
c) RCU. Once again, the RCU team conducts the document check of all the original papers submitted. The property papers-index 2 copy, etc are counter checked with the sub-registrar’s online link facility. The TDS, form 26AS and any tax related documents are confirmed through online portal of IT department of India. The RCU may sample the document if found suspicious. Till such time the disbursement is kept on hold until the successful re-verification.
d) Sign Up by Credit. A complete set of disbursement file along-with the RCU verification, DM sheets and the docket kit are then forwarded to the credit manager for the disbursement sign up. The credit manager then studies, reviews, re-investigates on the file, re-calculates and re-confirms the eligibility figures with the lender’s laws & funding policies. It takes nearly 1-2 hours for a credit manager to review a file. Finally, on the satisfactory review the credit manager sign-up the docket. It is a significant part of disbursement; the credit manager is the signatory authority who certifies the check on financial credentials of the borrower and accordingly approves the loan amount.
e) The loan amount cheque is finally to be printed. The responsibility is delegated to the operation team. Prior to the cheque printing the operation team once again re-checks for any queries such as cheque clearance of the loan charges, OTC clearance etc. Any query emerged if any is to be sorted out on priority to ensure the timely cheque cut of the loan borrower. The cheque is then handed over to the borrower or the loan amount is disbursed in account through RTGS.
There are banks who also allow the OTC format of disbursement. Under such format a disbursement cheque cut is done prior to the submission of the original documents. The RCU verification is compulsorily done on submission of the OTC documents. Only after the OTC clearance the cheque is handed over to the borrower.
The turnaround time for processing the home loan & mortgage loan is about 15-20working days, depending upon lender to lender.
Get Best Home Loan Deals From Top Banks
|Bank Name||Rate Of Interest||Processing Fees||Tenure|
|ICICI Bank||6.90% p.a. – 8.05% p.a.||0.30% of the loan amount + applicable GST||Up-to 30 years|
|HDFC Bank||6.80%* p.a. onwards||Rs.5900/- + applicable GST For Salaried 0.30% of the loan amount + applicable GST -For Self Employed||Up-to 30 years|
|HDFC Ltd.||6.90% p.a. – 7.85% p.a.||0.50% – up-to 1.50% of the loan amount + applicable GST||Up-to 30 years|
|Canara Bank||6.90% p.a. – 8.90% p.a.||Rs.10,000/- + applicable GST||Up-to 30 years|
|CLICK to get the complete chart|
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