A home loan, or what is home loan, is a type of secured loan. The property bought with the loan money serves as collateral. Once the borrower has repaid the loan in full, the property gets transferred to the borrower’s name. However, until the borrower has cleared the loan, the lender has the right to sell the pledged property for loan recovery in case of loan default. Since home loans are secured in nature, lenders do not charge a high rate of interest on these loans, if a borrower has the right profile for it.
If you are planning to avail of a home loan, you must familiarise yourself with the home loan process. In this article, we will walk you through the home loan process. However, before we do that, let us take a look at some of the things that borrowers must know about home loans.
Things You Must Know About Home Loans
– Home loans are a type of secured loan. The property brought with the loan money serves as collateral. Since home loans are secured by a collateral, lenders offer these loans at a low interest rate. In fact, home loans are the cheapest of all loans. Currently, home loan interest rates vary between 7% and 14%.
– Home loans are paid in the form of EMIs. Each EMI consists of a principal component and an interest component. During initial years of loan repayment, the interest component is much higher than the principal component. As time advances, the principal component goes up. Missing an EMI not only leads to the borrower being slapped with a late fee, but also has a negative impact on a borrower’s credit score and one’s chances of availing of a housing loan in the future.
– While availing of a home loan, your lender will ask you to pay a home loan processing fee, legal and technical verification charges, etc. One may be able to get these charges waived off by negotiating with their lender or applying during the festive season.
– The home loan interest rates offered affect the affordability of a loan. High home loan interest rates make loan repayment difficult and EMIs unaffordable. Low interest rates help keep one’s EMIs on the affordable side and also help one reduce the total cost of borrowing the loan. Borrowers should negotiate with different lenders and seal the lowest home loan interest rate deal.
– If you wish to get approved for a home loan quickly and also wish to avail of a low home loan interest rate deal, maintain a high credit score and income and job stability.
– If your home loan eligibility is low, you can enhance it by adding a co-borrower with high creditworthiness or buying home loan insurance.
These are some of the basic things that borrowers must know about home loans. Let us now walk you through the home loan process.
Step-by-step Guide to the Home Loan Process
- The first step in the process is deciding on a lender after thorough research and then applying for a home loan with them. You can apply online as well as offline. However, most people prefer to go for the online home loan application route.
- While filling the application form, you will be required to disclose a few details about you, such as your name, address, income, employment details, details of the property you wish to buy with the loan money, etc. Further, you will also need to attach certain documents, such as KYC and Income proof documents, property-related documents, etc. You can go to your lender’s website and look for the list of documents you will need during the home loan application process. Keeping these documents ready will help you experience a hassle-free process.
- While submitting the form, you will be asked to pay a loan processing fee. The loan processing fee varies between .5% to 1% of the loan amount and is non-refundable. Borrowers can negotiate with their lender and ask them to trim down the fee. They can also apply during the festive season, when most lenders waive off these fee on their own to entice new customers.
- After you have submitted all the documents, someone from your lender’s team will connect with you to let you know whether or not the lender is willing to offer you a loan.
- If your chosen lender wants to offer you a loan, they will move to the legal verification of all the documents. They will also verify all the property papers and send someone to assess the property and carry out technical verification. Please note that this may take up to a week.
- If your lender finds everything satisfactory, they will go ahead and extend you a loan offer. If you are happy with the loan offer, you can accept it. If you are not happy with the terms and conditions mentioned in the offer, you can start the negotiation process all over again.
- If you accept the loan offer and send a signed copy of it back to your lender, they will begin working on the final loan agreement. While every other step of the home loan process can be carried out online, one must visit their lender’s office to sign the loan agreement.
The home loan process is simple and stress-free if you have educated yourself well. We hope the information provided in this article will help you navigate the home loan process easily, if you are planning to apply for a home loan any time soon. While home loan approval and disbursal usually takes a few weeks, those who want the loan money in their account as soon as possible can benefit from choosing a lender know for speedy disbursal and approval.
