Home Loan Explained
Home Loan Explained
Home Loan plays an important role in helping one with easy availability of your dream home. There are a number of banks that offer home loans at low interest rate. You may want to either want to buy a new home or construct one; it has few formalities starting from submitting the application for disbursement of loan amount. Keeping basic documents ready in hand saves time and effort.
Home Loan amount varies from person to person depending on the repayment capacity, age and income of the loan seeker, his/her dependents and so on. The loan is available to those who are eligible for a contract such as any person who is not less than 18 years, must not be insane and should not be insolvent or bankrupt. Loans are offered to salaried individuals, professionals or businessmen or self-employed individuals and NRI’s.
Image Courtesy: Vakil Housing Development Corporation
Stages Involved
There are mainly three stages for transferring home loan from lender to borrower. They are as follows:
- Duly filled applications with necessary documents: This is the first step in applying for home loan. Borrower has to submit a duly filled application with all necessary documents.
- Sanction: This is the process of allotting home loan depending upon your age, repayment capacity and the value of your property.
- Disbursement: This is process of transferring loan from lender to borrower. There are number of banks the lend you a home loan. They will transfer the amount sanctioned to your account.
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Documents Required
For a home loan to be sanctioned, you need to submit basic documents along with application. It determines the rate of interest and amounts to be sanctioned as home loan. The amount varies for each person depending upon their repayment capacity and credit rating. Following documents are essential for getting sanction of home loans.
- Duly completed application form with passport size photo
- Repayment track record of existing loans (if any)
- Proof for photo and age
- Residence address proof and signature verification proof.
- Copy of sanctioned plan and sanction letter
- Fee cheque
Additional documents required are the following
ØIn Case Of Self Employed person
·Bank Statement for 6 months (Operating Account in case of self occupied)
·Income Tax return/ Computation of Total income Certified by Charted Accountant (CA) for last three years
·Tax Challan, Balance sheet and Profit/Loss Account for last three years
ØIn Case Of Salaried
·TDS Certificate and Identity card
·Bank Statement of Salary Account for 6 months
·Last three months salary slip and Form 16
Tips for Home loan
- Affordable Price: You need to do some homework before applying for a Home loan. You need to know how much you can afford. It depends on various aspects such as your monthly expense, current salary or income, credit rating, down payments and interest rate, dependents and so on.
- Compare Cost: There are a number of banks that compete to offer home loans at low-interest rates. You need to do some homework and compare the cost and the rate of interest offered by each lender.
- Choose right home or place: After scrutiny of your loan application, bank sanctions the loans and disburses it into your account. You need not make haste in choosing a home. Contact your realtor for appropriate home or place.Inspect the property you plan to buy and make an offer.
- Insurance: There are various insurance scheme for your property such as insurance from fire, disaster and so on. Lender requires that you have insurance for your property to safeguard their interest.
- Sign or close the deal: Following these tips, step by step, will help you close the deal smoothly and sign the final settlement. The property or dream home is yours now. If this is your first property transaction, realtor will help you in each and every step to help you own the property.
 Having any query regarding Home Loan? Let our Expert help you. Click here. |
Types of Home Loans
Home Loan is mostly used for purchase of new home or property. Most of the borrowers consider home loan only for buying a home or property but there are different home loans for meeting different needs. Some of them are as follows:
Home Purchase Loans: This for purchase of new home and most of borrowers use this type of loan in purchase of new home or property. These are very common and are basic home loans.
Home Improvement Loans: It is a loan sanctioned or disbursed for the repairs and renovation in existing home. This is very helpful for borrowers who wish to renovate or implement some repair works in existing home or property.
Home Extension loans: This is a loan given for extending or expanding existing home. This can be used for modification of rooms or adding an additional or extra room.
Land Purchase Loan: The name itself states the purpose of loan. It is the loan sanctioned for the purchase of land. Land can be either for construction or investment purpose.
Home Construction Loan: The loan is available for construction of new home. It is a loan sanctioned for constructing a home in existing land or property.
Home Conversion Loan: This loan sanctioned for existing borrower who have financed present home with home loan and wished to move new home which needs an extra funds. This loan helps to transfer existing loan to new home with extra amount and helps to avoid pre-payment charge of previous loan.
Bridge Loan: Bridge loan is a loan for those who want to sell existing home and buy a new home. This loan helps you to finance new home until you find a buyer for existing home.
Home Loan Lender
There are number of lenders who offer home loan at low rate of interest. It seems very complication for buy a home and it will be easy if you move systematically. One of the important aspect in buying a home is finding best housing finance company. Here are some tips for you to find best lender.
Choose the lender after finalizing the property: It is recommended to choose the lender only after you finalize the property. It helps you to get home loan easily as the lender knows what type of home you are planning to buy. Some company offers loan for self constructed or under construction property and some offers ready to move in property.
Loan Eligibility: You need to talk to different banks to know which offers maximum amount and loan at affordable rate. You can club your and your spouse income for increasing your loan eligibility.
Rate of Interest: There are fixed and floating rate of interest for home loan. Fixed rate is not fixed for long period but fixed for a certain period. If you are going for floating rate check whether rate of interest of lender had floated down over last couple of years.
Never Haste: Never haste in choosing a lender. Remember that cost of loan depend on how you negotiate. Check the rate of charges apart from interest such as legal charges, processing fee, hidden cost, pre-payment fee and so on. Never trust on verbal promises of your lender and get everything in writing.
After scrutiny of your loan application, bank sanctions the loans and disburses it into your account. You need not make haste in choosing a home. Contact your realtor for appropriate home or place.Inspect the property you plan to buy and make an offer.
