Buying a home is a very significant investment for most of us. You would not like to take a risk with any inappropriate investment. During this project of buying a house, the procurement of home loan is equally important, as selecting a property is. In fact, for most of us, the decision of purchasing a property is based on the amount of home loan that we can avail. Getting a Home Loan might appear as an extensive project. But if you follow a few tips discussed in this articles, then you can smoothly run through the complete process without any hassles. This article shall help the investors especially the first time home buyers to know what exactly they need to do to become home loan ready.
The process of becoming Home Loan ready starts 6 months prior for those who never bothered to be financially disciplined. Follow these simple steps as soon as possible to inculcate financial disciple in your life.
1. Clean up your Credit Report
The first and the foremost point that all loan providers, refer to before lending, is your Credit Report. All the lenders expect you to have a clean credit history with a good credit score of 650+. Make sure to check your CIR (Credit Information Report) as well as your Credit Score online at least 6 months prior to applying for the loan. This will provide you sufficient time to set your score right if there is a problem. And give you confidence if you have a good Credit Score. You can buy your CIBIL TransUnion credit report (including credit score) online for Rs.470 only.
Tip: Pay off all your delinquent accounts, late payments etc. and start making regular payments for your Credit Cards and loan EMIs at least 6 months before availing home loan.
2. Pay off existing debt:
If you are have availed multiple loans, then try to pay off these loans before you apply for home loan. As having several loans might affect your loan eligibility, few Banks however, along with your home loan, provide a scheme of debt consolidation also. But this is subject to your monthly income. As any other EMIs that you are paying right now, gets factored while calculating your loan eligibility. The lesser EMIs you pay each month, more is your loan eligibility based on your income.
3. Improve your Banking Habits:
Whenever you apply for any loan, the bank account statement is one of the most important documents that lender asks. Through your Bank Statement, the lenders verify the banking habits, lifestyle (easily noticeable if you use your debit card frequently) and your repayment behaviour. The lender expects you to have a good credit balance every month (at least equivalent to the EMI that you will repay for your Home Loan). Please ensure that there is no cheque bouncing especially due to “Insufficient Funds”. However, other cheque rejection reasons like “Signature Mismatch” are still acceptable as an exception. But such instances should not exceed twice in last 6 months to 1 year. The lenders generally ask for last 6 months Bank Statement, if you are salaried, and last 1 year statement, if you are self-employed.
4. Keep your documents in place:
When you apply for Home Loan, following documents need to be submitted to the lender:
|Self Employed Professionals||Self Employed Businessman|
|Application form with photograph||Application form with photograph||Application form with photograph|
|Identity and Residence Proof||Identity and Residence Proof||Identity and Residence Proof|
|Latest Salary-slip||Education Qualifications Certificate and Proof of business existence||Education Qualifications Certificate and Proof of business existence|
|Form 16||Last 3 years Income Tax returns (self and business)||Last 3 years Income Tax returns (self and business)|
|Last 6 months bank statements||Last 3 years Profit /Loss and Balance Sheet||Last 3 years Profit /Loss and Balance Sheet|
|–||Last 6 months to 1 year bank statements||Last 6 months to 1 year bank statements|
On the basis of above documents, the lender can offer in-principal approval for your loan application. That is, the loan is sanctioned subject to positive property verification.
In addition to the above documents, you need to submit the copy of all property papers that you desire to purchase. It is always recommended to verify the complete chain of property documents available with the seller for at least last 13 years, before entering into “Agreement to Buy”. The Banks, generally, do not process the loan application without the “Agreement to Buy/ Sell”. If you are not confident on the property chain, it is always advisable to consult a property lawyer well in advance. The lawyers, analyse the chain of the property and help you in making the decision to buy or reject the property. They also help in execution of the sales/ purchase transaction.
5. Office and Residential Stability:
The lenders, along with verifying your income, banking and property papers, they also verify your job and residential stability at current address. This is done to avoid the risk of a fraud or any desertions later during repayment of loan. Hopping the job frequently might get you into trouble while you apply for loan. Generally, a stability of at least 6 months is desired both at the residence as well as the workplace.
6. Apply for Pre-Approved Loan:
If you intend to buy a property within a couple of months, then you can apply for pre-approved home loan with the Bank. As mentioned above, most of the Banks, these days, sanction a loan amount that can be extended to you, even before you have zeroed in the right property for you. As an extension to this service, many lenders like ICICI Bank and HDFC Ltd. help their customers to find their dream home. For instance, HDFC has started an online portal www.hdfcred.com wherein all the projects approved by HDFC have been listed. The borrowers can get their loan pre-approved and can then start looking for a home. This also enables you to be more precise with your budget for buying the property.
7. Understand the Loan Process of lenders:
Whenever you apply for a loan, be prepared for lot of queries, phone calls and different visitors walking in on behalf of the Bank/ lender. The loan providers follow a process wherein they outsource most of the verification process to third-party vendors. After verifying their identity cards, you can address to their queries. Your loan application is processed and approved/ declined by the Credit department of your lender that generally takes 4 to 8 working days to make a decision on your loan application. Once the loan is approved, then your sales officer guides you on further process of completing rest of the formalities.
8. Do an online research:
As you get prepared for availing a Home Loan, do not forget to do an online research on the best rates and schemes offered by different lenders. There are different Home Loan products available in the market as per your requirements. For example: some lenders offer a product “Home Loan OverDraft” that is best for those who wish to make pre-payment of their loan. Although, RBI has mandated all the lenders to waive off the pre-payment penalty charges. But still, having a Home Loan OD (OverDraft) saves you from the hassles of approaching the lender for pre-payment, standing in a queue, filling up form and rest of the formalities. It is a unique product that gives you freedom to transfer surplus funds to your HL (Home Loan) account online to save on the interest repayment. At the same time, it also allows you to withdraw some funds from your HL OD account.
Similarly, there are different Home Loan products offered by different lenders at various rates. The key to grabbing the best deal is to do your homework in advance and become Home Loan ready. We at BankBazaar.com, help you to compare various Home Loan products and rates offered by different lenders and pick the best deal for you.
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