Home Loan Process: A Step-by-Step Guide To Housing Loan Procedure

Generally, a home loan application to disbursal process comprises the following – application, submission of documents, document processing and verification, sanction letter, legal verification, loan agreement and disbursal. However, different lenders have different home loan procedures. 

If you’re an aspiring homebuyer looking for a home loan, you have come to the right place. We have fragmented the entire home loan process via a step-by-step guide. Let’s dive in! 

Important Information About Home Loans

People seek home loans to buy a new house or an apartment or to initiate repairs, renovations or extensions of their existing homes. Lending institutions offer home loans for these specific reasons against a house as collateral. If a borrower fails to repay their loan amount, the lender has every right to sell the property and recover all dues.

To avail a home loan, you need to fulfill certain eligibility criteria. Several factors including your age, repayment capacity, credit history, and other parameters will be considered before the lender decides to approve your loan application. 

If you are looking to avail a home loan, download the Navi app now. It provides a simple, hassle-free and seamless home loan process that takes only a few minutes to complete.

Home Loan Process: Step-by-Step Guide

Generally, the entire home loan process – from loan application to disbursal – looks like the steps below:

Step 1: Filling Out the Application Form

The first step is the home loan application process. Start with filling up the application form. Visit the official website, or download the app of your preferred financial institution and select ‘Apply’. Next, you will need to fill up a few basic information in the application form. This can include your personal details, education, employment details, residential address, yearly income, etc.
Once this is done, attach scanned documents, including your PAN (Permanent Account Number), Aadhaar, identity proof, address proof, salary slip, and bank statements, to name a few.

Step 2: Documents Collection

Submit the following documents to proceed further:

• KYC documents – Passport, Aadhaar card, employee ID card, driving licence, etc.
• Documents of proof of business of a minimum of 5 years for self-employed individuals
• Bank account statements for the last 3 months for salaried individuals and 6 months for self-employed
• Salary slips for the last 2 months
• Documents of the property to be held as mortgage

*The list of documents is indicative. The lender holds the right to ask for additional documents, if required.

Step 3: Evaluation and Verification Submitted Documents

Next, the lender will evaluate the documents to verify their authenticity. The lender’s representative will conduct the following checks for verification purposes.

• Your residential address
• Credit score
• Workplace
• Credentials of your employer
• References listed in the application 

Step 4: Loan Sanction Process

The lender will send either a loan approval in the form of a sanction letter or a rejection letter upon verifying the information you have provided. If all your submitted information is accurate, it will only take a few days to get your loan sanctioned.
The loan sanction document will contain details such as sanctioned loan amount, interest rate, tenure, mode of repayment and designated terms and conditions. If you accept the conditions, you should sign a duplicate copy of the letter and send it back with an acceptance letter.

Step 5: Paying the Processing Fee

The next step usually requires you to pay the processing fee to the lender. This is a non-refundable amount charged by a lender for the work to process a loan application. The amount varies between lenders but usually ranges from 0.25% to 1% of the loan amount.

Step 6: Property Verification, Legal Check and Site Estimation

After accepting your letter, the lender will perform extensive property verification. You could be required to submit all the original property documents, which will remain with the lender till you repay the loan. 

You will have to submit the original copies of the title deed, encumbrance certificate, No Objection Certificate (NOC) and other documents as per the lender’s policies.
The financial institution will then perform a legal check for all the documents, followed by a property check. For this, an expert will visit the property site and check its market value.

Step 7: Signing the Loan Agreement

After all the paperwork is complete, you will have to sign the home loan agreement. Afterwards, you will be required to hand over all property papers and pay the stamp duty.

Step 8: Loan Disbursal

Lenders don’t fund 100% of the property value. Depending on the risk involved, lenders sanction the loan amount based on what they deem fit. Financial institutions assess lending risk through what they call LTV (Loan-to-Value Ratio).
For instance, if a lender says the LTV ratio is 80%, this means that they will finance 80% of the property value, while you have to pay the remaining amount as down payment.
Your sanctioned amount will be disbursed once all the criteria are met.

Also Read

Home Loan Interest Rates in India 2023 – EMI and Charges

7 Affordable Housing Schemes by Government in India – Benefits And Eligibility

How to Transfer a Home Loan

Home loan repayment tenure is considerably long and you might come across a home loan provider with lower interest rate or more efficient services. You can choose to change your lender by opting for a home loan balance transfer. The following steps are followed for home loan balance transfer:

Step 1: Submit an application to your current lender stating the reasons on why you want to transfer your home loan.

Step 2: After careful consideration, the lender will provide you with an NOC which will be required by the new lender.

Step 3: Submit the documents along with the NOC and KYC details to the new lender.

Step 4: You have to collect the response from your old lender stating that the loan account has been closed successfully.

Step 5: As the old contract has ended, you can get a new contract with the new lender. Pay the fees if anything is due and you can start paying your EMIs to the new lender from next month. 

Processing of Mortgage Loans

The processing of mortgage loans can be time consuming but with the right assistance from both sides it shouldn’t be much of a hassle. The processing of mortgage loans generally goes through the following steps:

Step 1: There are a large number of lenders in the market. You have to choose the one that is best suited according to your need and ability

Step 2: Once you have found your lender, get the pre-approval. Pre-approval states the maximum amount of loan that the lender is willing to provide you.

Step 3: Now that you know how much you can afford, you should find a suitable property.

Step 4: After you have found your property, you should approach your lender for the mortgage. The financial institution will ask you to submit various documents. As this is a secured loan, you will be required to submit a large number of documents for verification.

Step 5: After careful consideration of the documents, you will be given a loan estimate, usually within three business days. You have to give a credit fee to get the loan estimate.

Step 6: The loan estimate is valid for 10 days. If you accept it, the lender will begin with the next process, which includes verification of bank deposit, employment, property inspection, and title search.

Step 7: In the next step, your application will be verified by the underwriters. It is the most crucial part as your loan approval depends on the decision of the underwriters. 

Step 8: If your application is approved, you will be asked to be present at the lender’s office for a closing meeting. In this stage, you will come across the disclosure form. If you agree to everything documented in the form, you can sign the documents and collect the keys to your new home. 

Calculation of Home Loan Borrowing Capacity

You need to fulfill some criteria as required by the lender to be able to get a home loan. The capacity of the borrower is determined by a lot of factors. Some of them are common to all the lenders. They are as follows:

• Age of the borrower
• CIBIL score
• Work experience for salaried individuals
• Business continuity for self- employed individuals
• Monthly salary
• Other obligations
• Nationality 

Calculate Your Home Loan EMI

How can you Get an Instant Home Loan Approval with Navi?

If securing funds via the above-mentioned process seems too cumbersome, you can opt for a home loan from Navi. We provide housing loans up to 90% of the property value at low-interest rates starting from 7.39% p.a. 

Follow the steps given below to access your home loan in no time:

1. Download the Navi app–
2. Submit the property details, including property type and address.
3. Enter basic profile details and PAN and check your eligibility.
4. Get loan approval in just a few minutes without uploading any documents.

You can use Navi’s Home Loan EMI calculator to determine the ideal EMI that will make your loan much easier to repay. 

Final Words

For a smooth and seamless home loan process, make sure you have all the basic KYC (know your customer) documents and property papers. Enter all the correct information, and you will get the home loan sanctioned in only a few days. 

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