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12 April 2022

Understand the Housing Loan Process and its Features

Housing loan is the most demanded high-ticket loan among borrowers desiring to own a residence. The reasons can be attributed to the affordable interest rate, work from home needs, reduced circle rate, stamp duty, etc.

However, lenders follow a structured housing loan process before disbursing the amount to the respective account. It substantiates the need for understanding the steps involved in credit processing for an informed borrowing. 

Since a home loan is a long term financial commitment, borrowers need to plan their financials beforehand.

What are the steps involved in home loan processing?

Different lending institutions follow specific home loan processing steps. Typically, the processing starts after the individual has submitted a loan application. Some of the common steps have been discussed below.

  • Filing an application- The first step involves an applicant filling a home loan application form. These data includes address, Aadhaar and PAN number, etc.
  • Document verification- Individuals need to submit documents to substantiate the details mentioned in the application form. Lenders scrutinise the authenticity of documents. In addition, some lenders may conduct a face-to-face interview to confirm an applicant’s credibility. 
  • Hard enquiry- This is a standard protocol followed by most HFCs. They conduct a background check of an applicant to evaluate their repayment capacity. This involves checking job profile, CIBIL score, credit history, etc. The lenders also evaluate the property value and location to decide the loan amount.
  • Processing fee payment- After lenders are convinced of an individual’s repayment capability, the loan processing begins. Applicants need to pay a processing fee which is a charge against the steps conducted to check and calculate home loan eligibility. 
  • Loan approval- Financial institutions issue a letter stating the loan approval after successful verification. This letter includes loan amount, terms and conditions, housing loan interest rate, additional benefits, and tenor.
  • Disbursal- The loan amount is disbursed to a verified account after the borrower submits the final documents.

Having a clear idea about these steps would help an individual in decoding the home loan process and arrange the documents accordingly. This would also help them save from the complete process.

For instance, if an existing home loan borrower finds a lender offering a lower interest rate, they can opt for a housing loan balance transfer. This would help them in finding better terms and services.

Moreover, selected HFCs also extend pre-approved offers to eligible applicants. These offers make a loan application hassle-free and prompt. Typically, the offers are levied on financial products like home loan, LAP, etc. Check your pre-approved offers by entering your name and contact number.

Here are some additional home loan benefits that make it a lucrative credit option for intending homebuyers.

What are the features of a home loan?

Following benefits make a home loan a good funding source for purchasing a house.

1. Simple eligibility parameters

The eligibility terms on a home loan are straightforward. Borrowers need to fulfil basic criteria to access the needed credit. Some of them are-

  • The age limit for salaried is 23 to 62 years and 25 to 70 years for self-employed applicants.
  • Salaried applicants need to have work experience of a minimum of three years. 
  • Self-employed individuals need to show documents proving the business continuity of more than five years.

2. Nominal documentation

Documentation process of a home loan is quite simple. Some of the papers that applicants are obligated to submit-

  • Income proof like bank account statement for last six months, salary slips
  • KYC papers
  • Business vintage of at least five years. (for self-employed and business person)

3. Flexible tenor

A home loan offers a borrower the flexibility to choose a tenor based on their financial capability. This aids in initiating savings on interest payable. For instance, choosing a short tenor would reduce overall interest outgo. In this regard, using a housing loan EMI calculator would be a wise decision. It will help in getting a feasible EMI against a tenor you choose. 

These are some of the lucrative features of a housing loan that makes it a viable option for intending house buyers. In this regard, knowing the steps involved in loan processing would aid in streamlining the application process.

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