Buying a home in today’s economic climate is no longer a task that stretches over years, like earlier. There are several changes in the market to which this can be attributed – people’s increased purchasing power and spending appetite, a large stock of unsold inventory, attractive real estate prices that are now regularised; and the significant ease of borrowing a low-interest rate home loan.
However, out of this, the ready availability of home loans impacts a buyer’s decision most heavily, as, without the right funding, no dream house is complete. Aspiring homebuyers no longer have to struggle to build the required corpus, or even break the bank to buy their dream property. Home loans are now readily available for borrowers to avail of, with minimal hassles and almost instant approval and disbursal. The rapid turn-around time reduces the fatigue that is historically attached to such lengthy borrowing processes and encourages more individuals to consider home buying undeterred by old and archaic lending practices.
Achieving speedy home loan approval and disbursal is common now, provided applicants have done their due diligence and can meet all of the lender’s eligibility criteria and other lending prerequisites. In this article, we highlight all the mandatory checkpoints that lenders consider before allowing a quick home loan approval and a speedy disbursal, including the documents required for a home loan.
Important Check Points Before Applying for a Home Loan
Following are some of the important parameters applicants must bear in mind before applying for a home loan.
- Home loan eligibility
Every lender checks the applicant’s profile against a certain benchmark to see whether the applicant is qualified to borrow the home loan they have requested. This check is carried out against the following factors, amongst others –
- The applicant’s current financial standing
- The applicant’s income and employment
- The applicant’s ongoing financial obligations
- The applicant’s current debt obligations
- The applicant’s credit report and CIBIL score
- The applicant’s repayment history and habits
- The applicant’s current repayment bandwidth
This gives the lender a realistic idea of whether or not the applicant can undertake a new EMI commitment without defaulting or delaying on their repayment schedule. This activity is essential to determine the applicant’s creditworthiness.
2. Loan-to-value ratio
No matter high your home loan eligibility is, no lender is permitted to offer you the entire property value as a home loan. The Reserve Bank of India allows home loan lenders to fund up to 90% of the property’s value, in the form of a home loan sanction. The remaining amount is upon the homebuyer themselves, and is also called the down payment, and is often accepted as the booking amount by real estate developers.
Lenders further appreciate if applicants are able to fund this amount out of their own savings, as it speaks well to their financial planning and liquidity. By avoiding taking another loan for the property down payment, applicants also stand to reduce their total cost of borrowing, and if possible, also reduce their total home loan amount as well.
3. Required documents and paperwork
Lastly, lenders request very few documents to assert your financial and personal profile and it is important that you’re able to provide the required paperwork to be eligible for a speedy approval and disbursal. Ensure that you keep these documents at just an arm’s length regardless of which lender you’re applying to, as all lenders request a similar set of documents. Take a look for a deeper understanding –
- KYC documents
- Identity proof (PAN card, Aadhaar Card, valid passport, valid driving license, or a voter ID card)
- Address proof (Any home bill, such as telephone or electricity bill, bank statements or passbooks or a ration card)
- Age of proof (Birth certificate, PAN or Aadhar Card)
- Income proof
- A set of recent salary slips
- Bank account statement of up to the last 6 months
- Form 16 or ITR
- Relevant employment details and documents (Appointment letter)
- Property documents (including, but not limited to)
- Property allotment letter
- Approved building plan
- Title chain documents
- NOC from relevant authorities
- Registered agreement of sale
- Occupancy certificate
Ensuring that you’ve paid enough attention to all the aforementioned points will help you secure competitive lending terms on your home loan, such as a low interest rate, flexible repayment tenor and sizeable sums, amongst others.