HOME LOANS

Varenyaa – Home Loan Guide

We understand that the purchase of property is always the primary purchase decision, and the decision to avail a housing loan is at best secondary and a mere facilitator to accomplish your purchase. Given this fact, we also realize that, more often than not, the decision to take a particular type of home loan, from a particular housing finance company is influenced by our well-wishers – who unfortunately may not be very well informed.

Whether you are buying your first home or investing in property, our team at Varenyaa Properties can help you identify the best housing finance company and the best home loan product to suit your profile and needs. Our team has extensive hands on experience with various banks and has intimate knowledge of home loans that you could use!

HOME LOANS – STEP BY STEP

HOME LOAN DOCUMENTATION, SIMPLIFIED.. 

TOOLS AND CALCULATORS 

GOOD TO KNOW!

HOME LOANS – STEP BY STEP

  • Home Loan Sanction
    • Submit a duly filled application form with requisite supporting documents
    • Bank conducts a physical verification at your place of residence and work
    • Bank conducts a telephonic verification
    • Bank also accesses the available information on your past repayment of any loans or credit cards you may have taken from any bank
    • Assessment of the application is done basis all of the above
    • Eligibility calculation is done by the bank (this is subject to property assessment)
    • Decision to sanction or reject the loan application is communicated to the applicant/s
  • Home Loan Disbursal
    • The customer submits original property documents as may be required by the bank
    • Bank conducts a legal assessment of the property
    • Bank sends their empanelled experts to assess the current market value of the property
    • Customer is communicated the final loan eligibility
    • Customer fills and submits various forms along with the loan agreement
    • Bank takes custody of the documents and disburses the loan amount in favor of the seller
  • Post Disbursal
    • Banks generally send a welcome letter detailing the terms and conditions
    • Bank issues a letter listing all the documents that the bank has in their custody

The steps listed above are a broad guideline on the home loan process and may vary from bank to bank. The typical time taken by reputed banks is between four to six working days for a loan ‘sanction’ and another three to five working days for the loan ‘disbursement’. The time period may be longer in case of NRIs and may involve additional steps as well.

HOME LOAN DOCUMANTATION, SIMPLIFIED ..
The documentation for home loans can sometimes seem overwhelming. Being aware of the documentation required can substantially ease the experience of taking a home loan and also expedite the process as well.

We attempt to simplify the documents required so that you can be better prepared even before you approach a bank!
Let’s fist split the documentation in to two distinct sets:

(1) Sanction Documents and

(2) Disbursal Documents.

The sanction documents too can be divided in to two parts:

(1a) Identity documents and

(1b) Income documents.

It is only logical now that for different categories of applicants, the sanction documents shall vary.

  • Sanction Documents
    • Identity Documents – Resident Indians
      • Recent passport size photographs
      • Age proof
      • ID proof
      • Address Proof
      • Qualification certificates, if applicable (generally for Doctor / CA / CS etc)
    • Income Documents (Salaried Applicant – Resident Indian)
      • Latest three months pay slips
      • Latest Form 16
      • Copy of bank statement for the past six months with salary credits
    • Income Documents (Self Employed Applicant – Resident Indian)
      • Balance sheet and Profit & Loss Account for latest three years
      • Income Tax Returns for latest three years
      • Bank statements for latest 6 months.
        Documentation is a little more tedious for NRI home loan applicants.
    • Identity Documents – Non-Resident Indians (NRIs)
      • Recent passport size photographs
      • Copy of Passport and Visa (some banks may need copy of the first 6 & last 2 pages of the passport)
      • Copy of Work Permit or equivalent, if applicable in the country of residence
      • Copy of the highest qualification certificate
    • Income Documents (Salaried Applicant - NRIs)
      • Latest 6 months bank statement of the NRE account
      • Latest 6 months bank statement from salary account in the host country
      • Copies of appointment letter, increment letter, contract letter from the employer
    • Additional requirement for NRIs
      • A resident Indian is compulsory as a co-applicant (only family members permitted)
      • General Power of Attorney in favor of the resident Indian
      • Relationship proof with the attorney holder

All the ‘Identity documents’ are required for each applicant / co-applicant, and ‘Income documents’ are generally required only for applicants / co-applicants whose income is being considered for calculating the loan eligibility. Banks generally like to see details of any existing loans that you may have taken and may ask for documents to support your application. Several banks insist on submission of a copy of PAN cards of all applicants / co-applicants as well. All document submitted must be self-attested. 

The list above may be considered a good guideline for a home loan, but please note that documentation may vary from bank to bank, and additional documents may be required by various housing finance companies.

It may be useful to know that you need to only submit the sanction documents for the bank to begin processing your loan application. Only after you receive your loan sanction letter, the bank would approach you to provide the disbursal documents. So this effectively means that you can even apply for a home loan without having identified a property! A sanction typically is valid for up to three months during which time, our team at Varenyaa Properties can help you identify your ideal investment.

In practically all cases, the disbursal documents are identical for all applicants. In the next section below, let’s generate a list of disbursal documents that are typically required for your home loan.

The list of disbursal documents varies depending on the type of transaction in consideration.

  • Disbursal Documents
    • Original Booking - Purchase of new / under-construction flat from a builder
      • Original Allotment Letter issued by the builder
      • Original ‘Agreement to Sell’ between the buyer and builder
      • Original payment receipts for all amounts paid to the builder
      • Builder’s payment schedule (if not already part of the agreement to sell)
        That’s it! This of course is in the case of the projects that have been approved by the bank. Most banks offer home loans for purchase of properties only in projects that are approved by them.
    • Builder Transfer - Property in a builder project purchased from an individual
      • Original ‘Agreement to Sell’ between the buyer and seller
      • Original payment receipts for all amounts paid to the seller
      • Letter from the builder listing the terms of transfer the property in their records – whether on payment of charges or otherwise
      • Original Allotment Letter issued by the builder
      • Original ‘Agreement to Sell’ between the seller and builder
      • Original payment receipts for all amounts paid by the seller to the builder
      • Builder’s payment schedule (if not already part of the agreement to sell)
        So that’s really the same documents as the ones in case of an original booking with only a few additional documents really! If you look at it, these are documents that you would seek to obtain from the seller in any case to ensure your investment is secure!!
    • Ready property
      • Original Title Deed (generally the sale deed) of the property
      • Mother deed of the property
      • Latest encumbrance certificate (EC) for at least the past 13 years (must be applied closer to the disbursal date)
      • Original receipts for property taxes applicable for the latest 2 years
      • Copy of the mutation extract from government records
      • Copy of building plans in case of properties except projects approved by the bank

Needless to say, different banks may need additional documents as per their specific norms and the lists above are in no way comprehensive for all banks / properties. And by the way, the bank will ask for a few post dated cheques / ECS mandate for the payment of EMIs.

We do hope that this would’ve helped demystify the home loan process and hopefully have you better prepared to meet the bankers! We would be more than happy to facilitate an introduction to some of the leading banks, should you need our help. We are confident that a conversation with us on the most suitable home loan would not be a waste of time for you!

TOOLS AND CALCULATORS
Please do use our easy to use tools / calculators to understand your prospective home loan better!

GOOD TO KNOW!

  • Home loans are available for a variety of purposes including:
    • Purchase of an under construction residential property
    • Purchase of an ready residential property
    • Purchase of residential land
    • Home construction
    • Home improvement
    • Home extension
  • Home loans can be taken by the following individuals:
    • Resident salaried Indian individual/s
    • Resident self employed Indian individual/s
    • Non-resident Indian individual/s (NRIs)
    • In India, home loans are generally offered for a maximum period of 20 years. Some banks also offer loans up to a period of 25 years as well. The repayment is to be made through equated monthly installments.
    • Generally, a home loan is restricted to the tenure at which the applicant’s age turns 60 years. Some banks may have a higher age limit.
    • Loan tenure and EMI (equated monthly installments) have an inverse relationship i.e. higher the loan tenure, lower the EMI and vice versa.
    • Most banks permit up to four family members to come in as co-applicants for a single loan and in most cases also allow clubbing of their incomes to enhance the overall loan eligibility.
    • All co-owners of the property must necessarily be co-applicants to the home loan as well. All co-applicants however, need not be the co-owners of the property for which the loan is being sought.
    • Banks typically offer loans for up to 80% of the total cost of the property. This also includes the cost of registration, stamp duty etc. The loan amount as a percentage of property value may be lower in case of loan for the purchase of residential land (typically up to 70%).
    • Banks generally do not ask for any security besides the home for which the loan is being taken but may ask for additional security in some instances.
    • An applicant can take a loan to buy a property in one city while living in another city.
    • Banks generally insist the applicants to take insurance on the loan for property – this type of insurance is called a Mortgage Redemption Term Assurance (MRTA). Some banks may also insist on a Home Insurance too.
    • Interest on a home loan is generally calculated on a ‘Daily Reducing Balance’ method. This basically means that the interest on your home loan shall be calculated on the outstanding balance for each day. This impacts the ratio of principal and interest in the EMI that must be paid. Some banks may calculate on a ‘Monthly Reducing Balance’ method. The former is a better option.
    • Interest rates can be of various types
      • Fixed Rate Loans: This type of loan carries a fixed rate of interest for the entire tenure of the loan
      • Floating Rate Loans: The interest rate in this type of loan changes as per the market scenario and the banks overall lending rates
      • Semi-fixed rate loans: In such type of loans, the interest rate is fixed for an initial period of 2 to 3 years and then converts into a floating rate after that time period
        Some banks permit switching from one scheme to another on payment of a fee.
    • There are various types of fees / charges that may be applicable including loan processing fees, part-payment charges, fore-closure charges and late-payment charges. Increasingly however, several banks are offering loans that do not carry fore-closure charges.
    • Resident Indians can claim income tax benefits as per the provisions of the law.
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