Interesting facts about availing a home loan for a residential property in India!

Home loans are needed primarily for two reasons– (1) arranging for finances due to lack of it, and (2) to be doubly sure that the property being bought is legally safe.

The first reason of ‘not having adequate finances to buy a property cash-down’ is evident. While home loan applicants may have a good ‘yearly income’, they do not have the ability to cough-up the entire amount needed to buy the property. Hence, it becomes prudent to taking a home-loan, and commit to paying an Equated-monthly instalment based on the potential to repay!

The second reason is the ‘safety aspect’. Many home-buyers have the potential to buy the property upfront, but they still avail a loan for tax reasons, and to be sure of the safety/legal aspect. Residential property papers are checked thoroughly by a financial institutions before an approval is given. It feels safe for a home loan seeker to see that the property is viewed as ‘SAFE’ by a financial institution from a legal perspective.

Normally, most home loan seekers take a loan for 15 to 20 year tenure, an end-up repaying within an average of 10 years.

The following documents are needed by the financial institution for processing a home-loan application-

1. Identity and address proofs

• A valid passport, voter ID card, Adhaar card give credibility to your being a recognized citizen of the Republic of India
• Proof of residence so that there is an assurance of your credentials and background

2. Income documents

• These are required by the lender to assess the extent of loan you are eligible for
• Employed or salaried applicants are required to submit salary slips (usually last 3 months) determine the amount of your disposable income
• Self-employed applicants are required to submit income tax returns and computation of income for previous 3 years to get their eligibility assessed by the financial institution

3. Property documents

• All the property papers, linked documents, the proposition of apartments, parties involved, a clear agreement to sell, the title deeds, etc. are evaluated by the financial institution
• The intent is to give a go-ahead for loan only if it is safe for the bank itself to ‘lend’ against the property. The property for which is lent is usually ‘mortgaged’ to the financial institution till the principle amount along with the interest component is paid back by the home loan lender
• This due diligence on the property is done basis these documents
• Financial institutions actually check out the property documents in original to get your home loan disbursed
• Your original property documents are mortgaged with the lender as a security and risk-measure

10 important things about home loans

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