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10 step guide for getting a housing loan in India

Looking for a guide that takes you through all the steps of getting a housing loan? You are at the right place. Here, we take you through 10 steps that you will have to go through while applying for a home loan. 

Building a house on your own is an expensive affair. It takes up your time; it demands you to put in consistent effort and above all, it requires a lot of money! 

While the procedure of getting a housing loan may be straightforward, this handy article will guide you through all the necessary steps to getting a housing loan sanctioned.     

Before we dive into the procedures let us look into what different type of loans is currently available in the market: 

 

Different type of housing loan currently available: 


According to Bank Bazaar following are the ten types of loans currently available in the housing space 

  • Loans for the purchase of a land

  • Loans for the construction of a home 

  • Loans for purchasing an already constructed home 

  • House expansion or extension loans 

  • Home conversion loans where if you have already availed a loan and purchased a property and  would now like to move into a new home. 

  • Loans for home improvement, wherein the loan is availed for interior or exterior work

  • Balance transfer loan where you transfer an existing loan into another bank 

  • NRI Home loans

  • Short term loans like bridged loans

  • Stamp duty loans where the amount is provided to cover the legal duty of the purchase. 


Reasons for getting a housing loan: 

 

  • Some of the reasons why you may prefer to get a housing loan are given below: 

  • To get a lump sum of money 

  • Non-availability of a large amount of money

  • To avail tax benefits 

  • Attractive interest rates 

  • Financial goals 

 

A 10 Step guide for getting a housing loan in India:     

Below are 10 steps that you have to go through to get a housing loan in India from any of the major banks. 


This is a generalized list and please do know that some of the procedures may vary depending on the institution from where you are availing a housing loan. 

 

Step one: Apply for a housing loan by duly filling in the application form: 

The first step is to apply for a housing loan at any of your desired institution. What institution you should choose entirely depends on you. You can check various websites to know the interest rates offered by banks and institutions in the market and choose one accordingly. 


Following are some of the best banking and financial institution that provide good housing loan options: 

 

  • State Bank of India 

  • Housing Development Finance Corporation Limited (HDFC)

  • Housing Urban Development Corporation (HUDCO)

  • LIC Housing Finance 

  • ICICI Home Finance Company Limited 

  • IDBI Home finance limited 

  • PNB Housing finance limited 

  • Dewan Housing Finance Corporation Limited 

  • GIC Housing finance limited 

  • Can Fin Homes limited 

 

Once you have narrowed down to your desired option, you can now go ahead and ask for a housing loan application from the institution. 

Once you receive the application, go through it thoroughly and fill in all the required details. The bank officials will be happy to help you at any stage. So feel free to ask them for any help or guidance. 


Make sure you understand all the sections of the application before filling it so that you can save both time and effort. 


Once you have filled in the application, submit it to the respective bank official for further processing. 

 

Step two: Submit all the necessary documents: 

The next step involves submitting all the necessary documents to the bank official so that they can verify your loan eligibility. 

Following are the common documents required for getting a housing loan. The documents needed vary from individuals depending on your source of income and the type of occupation you are engaged in.     

 

Documents required for housing loans: 

 

Documents required for all types of applicants: 

 

  • Loan application     form ( given above ) 

  • Passport size photos (3 nos) 

  • Identity proof (Type of identities required are given below) 

  • Proof of residence (details are given below) 

  • Account statement from your bank (passbook details) of the past 6 months 

  • Asset and liabilities statement 

 

If there is a guarantor then he/she should submit the following:

 

  • Identity proof 

  • 2 Passport sized photos 

  • Residence proof 

  • Assets and liabilities statements 

 

If you are a salaried individual you will also have to submit the following:

 

  • Original salary certificate from the employer

  • Form 16/ Income Tax returns for the past 2 years. 

 

If you are a self-employed businessman you should also have to submit the following: 

  • IT returns or assessment orders or copies of the past 3 years 

  • Challans as proof of advance Income tax payment

 

If you are a self-employed professional you should also have to submit the following: 

  • Income tax returns of the previous 3 years 

  • Challans as proof of advance income tax payment 

  • Proof of business address     

 

Property documents required: 

  • Sale Deed

  • Proof of payment of taxes, certificate of possession, and the certified sketch of the location of property from revenue authorities. 

  • Allotment letter from the builder or local society etc

  • Receipts of advance payment for the purchase of flats 

  • Non-encumbrance certificate for the past 12/30 years 

  • Land tax receipt 

  • Possession certificate 

  • Permission certificate from appropriate authorities 

  • NOC certificate obtained under the ULC Act, 1976.

  • Approved building plan 

  • NOC from builder 

  • The detailed estimate of the construction cost 

More documents may be asked by your bank or financial institution depending on the situation or relating to the property in question. 


 List of documents required if you are an NRI: 

 

  • KYC Documents 

  • Salary certificate from the employer (the salary certificate should be in the name similar to that of in the passport). The salary certificate should also have the current salary, designation, employee id, date of joining. 

  • Last 3 to 6 months of salary slips

  • Latest IT returns

  • Copy of passport and resident visa

  • Proof employment by the government or the legal authorities

  • Documents relating to the property

  • Bank statement copies of past 6 months of the international or NRI account. 

  • Power of attorney might be needed if you are not in the country at the time of availing the loan

  • If you are self-employed, then proof of business, trade license, sponsor agreement etc will also be needed. 

 

List of KYC documents that will be accepted: 

As photo ID (any one):

  • Passport

  • PAN Card 

  • Aadhar card 

  • Driving license 

  • Voters ID card 

 

As address proof (any one):

  • Ration card

  • Electricity bill

  • Telephone bill 

 

As age proof (any one):

  • PAN card

  • Passport 

  • Aadhar card

  • Birth certificate 

  • Driving license 

  •  

Please do keep in mind that banks and financial institutions may ask for additional documents if they find it necessary. 

 

Step three: Pay the processing fee: 

Now, you will be asked to pay the banks processing fee. This fee is different from bank to bank. Here you can compare different institution and can choose one that suits your tolerance. 


This usually ranges from 0.25 % to 0.50 % of the requested loan amount.
This is a onetime fee that you will have to pay to get the loan approved. 

 

Step four: Know your requirement and discuss with the bank official: 

Once you are all done with the above step you can discuss with the bank official to know more about the details of the loan you are taking. This discussion can range from the total amount you are taking to repayment terms. You can even take the discussion in depth to understand the number of monthly instalments you will have to bear or even the repayment terms. 


Most banking institutions would like you to insure your property too. Discussions pertaining to that can also be conducted here. Make sure you ask in depth about everything and that you clear all your doubts before proceeding. 


Remember, the key to clarity is to know your requirements before going into the discussion.

 

Step Five: Verification and scrutiny of your application

This is one of the vital steps in your entire loan evaluation process. Here is where the bank decides whether you are eligible for the loan or not. 


For this, you will have to meet personally with the bank officials. This is primarily done to ensure that the application is genuine. 


Here they will also gauge your repayment capacity by personally talking with you. 
Post the meeting the bank officials will set out to verify all facts and claims that you have put forth in the loan application. The officials may personally visit where you live, your workplace etc to make sure what you have said is authentic and true. 

 

Step Six: Evaluation of the repayment capacity: 

Here the bank will consider all the facts they have collected about your work, your income level and then decide whether you are eligible for that loan, the focus being on your repayment capacity. 


Your repayment capacity is your ability to repay the principal amount with interest in the given time period.     

 

Step Seven: The sanction or approval process

Once they have verified your repayment capacity, they will decide on whether or not to grant you the loan applied for. Here, the bank will let you know the maximum amount of loan that they can grant you. 


If accepted you will receive an official sanction letter that may or may not be conditional, the latter when the bank wants you to fulfil some conditions for the loan to be granted. 

 

Step Eight: Receiving of the offer letter 

Here is where you first hear the good news. 


Bank or the respective financial institution will send you an offer letter that will include the following: 

 

  • The total loan amount 

  • The interest rate 

  • Whether the interest rate is flexible or variable 

  • Loan tenure

  • Mode and terms of repayments 

  • Any other terms and conditions pertaining to this loan 


The Acceptance copy: This is what you will have to sign and give to the bank if the offer letter is acceptable for you. Once you sign it this is what bank will keep as a record of you accepting the terms and conditions of the loan. 


Please do make sure that you read all the terms and conditions mentioned in this acceptance copy since the relationship between you and this financial institution will be bound within these terms and conditions.

 

Step nine: Property check and legal verification 

Once all you have accepted the offer letter it is time for the bank to verify the property and do a legal verification of the property. For the same, you will be asked to submit the following documents. 

 

  • The name and details of the seller

  • The identification proof of the seller

  • Name and address of the property 

  • Relevant no objection certificates 

The bank may ask for additional documents if they feel it is relevant to the property in question. This legal check will primarily ensure the title of the property is in your name or the relevant person in whose name the loan is being taken. 


Do note that for most housing loans, the collateral is the property and hence, the bank will keep all the original documents of the property until the entire loan is repaid. 

 

Step ten: Site estimation and technical check

The bank will also conduct a technical check and site estimation of your property to assess the value. 


In case of an under construction property, the bank will take in parameters like

 
  • Location

  • Stage of construction 

  • Quality of construction

  • The progress of the work 

  • The time required for construction 

  • Locality etc 

 

In the case of a constructed ready to be sold the property

 

  • Age

  • Ownership

  • Quality

  • Cost of construction 

  • Maintenance 

  • Locality etc. 

 

This check is also done to understand the progress of the construction and also to gain the trust of the applicant. This is considered one of the important steps of the home loan process. 


The site’s value assessment is done to make sure that there are no malpractices done by the applicant. A value assessment ensures that only the right amount of loan is allowed depending on all the factors that need to be taken into consideration.   

 

Step Eleven: Signing of the agreement and disbursal of money 

The final step of the entire loan process is to sign the agreement with the bank stating all the terms and conditions of the housing loan. 


After the final technical verification and checks, the final deal will be presented to you which you can go through. 


This final process will be conducted by the legal advisor of the bank. 


Once all the final documents are processed, you can sign the agreement of the home loans. You will be asked to submit duly signed cheques that are post-dated to ensure that there are no defaults. Then, you will be asked to submit all the original papers of the property. 


The bank may decide to document the above-said handing over the process for their own safety or to avoid any future hassles. 


After you have signed the document, the bank will now disburse the loan amount to your account. The payment might be full disbursement or partial disbursement depending on whether the loan is availed for a fully constructed or under construction house. 

 

Conclusion: 

The above is our home buyers guide to getting a housing loan in India. 


Please do note that appropriate GST may be applicable to all the amount of fees mentioned above post-2017 July.     


Also, before getting a loan, know what you can afford and only commit to a deal that is financially suitable for you. Buying or constructing a home is only the first step to a huge commitment.