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Six easy steps to a home loan

November 06, 2003 11:36 IST
Last Updated: November 06, 2003 11:58 IST

Applying for a home loan may seem like a Herculean task, but it need not be so.

We list six easy steps on how to go about applying for a home loan.

Step 1: Submission of loan application

The first step involves filling up the application form of the housing finance company (or bank) along with the required documents. A one-time processing fee will also have to be paid at this stage.

Income documents needed:

If you are employed

  • Verification of employment form.
  • Latest salary slip/salary certificate showing all deductions for at least the past six months.
  • Form 16 from your employer for the past three years.
  • If your job is transferable, permanent address needs to be provided.
  • If you have been in your present employment / business or profession for less than a year, mention details of occupation for previous five years, giving position held, reasons for change and period of the same.

If you are self-employed

  • Balance sheet and profit and loss account of the business/profession along with copies of individual income tax returns for the past three years as certified by a chartered accountant.
  • A note giving information on the nature of the business/profession, year of establishment, present bankers, form of organisation, clients, suppliers, et cetera.
  • Your net worth as an applicant/co-applicant.

Step 2: Submission of property documents

  • Title deeds of the builder/land owner for a period of at least 13 years.
  • Development agreement between the builder and land owner if applicable.
  • Power of Attorney executed in favour of the builder, if applicable.
  • An encumbrance certificate for the past 13 years. An encumbrance certificate is  report issued by registrar of assurances or sub-registrar's office after due verification of the relevant documents certifying that the property in question is free from all encumbrances such as mortgages, leases, easements or restrictions.
  • A khata certificate. This certificate is the basic document indicating ownership of property as entered in the register of the government authorities.
  • Up-to-date tax paid receipts of the property.
  • A sanctioned plan and licence.

Step 3: At the housing finance company branch

  • An agreement for sale and a construction agreement with the borrower.
  • A comprehensive legal scrutiny will be done.
  • Pre-sanction inspection of the property will be carried out.
  • Credit appraisal and personal interview.
  • Following this, a sanction letter will be issued.
  • Acceptance of sanction letter. Administrative fee to be paid at this juncture.

Step 4: Final documentation for the loan

  • Tripartite agreement between the borrower, builder and the housing finance company to be submitted.
  • Proof of investment of margin money to be submitted.
  • Loan papers to be signed by the applicants.
  • Your guarantors should execute the guarantee agreements.
  • The original documents executed with the builder to be submitted.

Step 5: Disbursement of the loan

  • Inspection of the property will be carried out to ensure progress of work done.
  • Following this, there will be a release of loan amount directly to the builder to coincide with the progress of work done as per the agreement with the builder.
  • No objection certificate from the builder to mortgage the property in favour of the housing finance company to be obtained.
  • No objection certificate to be obtained from other housing finance companies if the builder has availed a project loan, to release the mortgage right over the flat to be financed by the company you are securing the loan from.

Step 6: After release of the loan amount

  • Receipt to be obtained from the builder for the amount released.
  • The sale deed, duly registered, must be obtained.
  • In addition to this, an up-to-date tax paid receipt would be sought.
  • An encumbrance certificate will be deemed necessary.

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