Have you ever wondered, what happens after you apply for home loan? Why does it take several days or even months for your home loan to be sanctioned? Why do you need to submit so many documents while applying? If yes, this article might help you.
Here are the steps that the lenders follow after you have applied for the housing loan.
Step 1: Processing fee
After you submit the application form, the lender asks you to pay the processing fee. The processing fee is a non-refundable charge, usually 0.25%- 1% of the total sanctioned loan amount. Though this fee differs from lender to lender, you might have to pay the processing fee even if your loan is not approved. This fee is charged to cover the amount spent by the lender on the processing of your loan application.
Step 2: Evaluation and discussion
The lender then takes a few days to evaluate your loan application and determine your repayment capacity and creditworthiness. They might also call you or visit you for a face-to-face meeting to gather more information. You must have your original documents with you during the personal discussion to help the lender cross examine the information you have mentioned in the application form.
Step 3: Investigation
After a face-to-face meeting, the lender would then proceed with the investigation of the details you provided on your documents and the application form. They could also visit you at your residence or office to validate the information that you have provided.
Step 4: Loan sanction
After a formal investigation, the lender starts the credit appraisal process. Under this step, the lender decides whether they would reject or approve your application based on your creditworthiness. The lender considers your income, age, qualification, repayment record and credit report to determine your sanction amount.
The sanctioned loan amount is informed to you through a sanction/offer letter. Along with the sanctioned amount, this letter also contains your tenure, rate of interest, terms and conditions, mode of repayment, etc. You need to sign this offer letter and hand it over to the lender if you accept the terms. Once you sign it, the lender shares a copy with you and retains one copy with themselves.
Step 5: Evaluation of the property
After you have accepted the offer letter, the lender begins the property valuation and verification. Once you have finalised the property, you would need to furnish the original documents of the property like sales deed, occupancy certificate, property map, NOC from the builder or legal owners, etc. The lender then sends experts to initiate the legal and technical verification process. They would ensure that the property has a clear title, is not disputed and has all the necessary approvals. They may also check the location and construction of the property.
Step 6: Registration
Once the lender finishes the verification process, you would need to review and sign the loan agreement document.
Step 7: Disbursement
The last step is loan disbursement. After you sign the loan agreement, the loan amount is disbursed on the agreed terms. The loan amount could be 85% to 90% of the total loan amount.
The process of loan approval differs from lender to lender. It might seem complex, but can be completed quickly if you comply with the lender’s guidance. Once you furnish the requisite information and documents, availing a housing loan would not take time.