Every individual nurtures a dream of building his/her own home. This could, for all practical purposes, be termed the first such dream towards establishing the independence and security of an individual or a family and thus, carries an immense emotional connect.
However, buying a home goes beyond emotions and involves intensive research. It is all about making the right decision, sieving through a host of options. Though it may seem that all banks and housing finance companies are eager to lend, getting a home loan could be a daunting task.
It is important for all of us to remember that buying a home is an important personal finance decision for every individual. Hence, a systematic and planned approach towards identifying a home and arranging for necessary funds is required. It is important to be familiar with how the home loan process works and the documentation required to avoid any last minute glitches.
While we will discuss the documentation requirements for a home loan both during processing and after the loan has been disbursed, here are some quick ‘did-you-know’ facts about home loans:
- Home loans can be availed by individuals (salaried and self-employed), co-operative societies and corporate bodies
- The home loan seeker can only avail a loan amount that does not exceed 75-80 per cent of the Market Value of the property
- There are two types of home loans based on the interest rates – fixed and floating. A fixed interest loan is where the interest rate doesn’t change throughout the loan tenure (Please check the loan agreement on reset clause of fixed rate). Floating interest loan, on the other hand, varies according to market conditions
- If an individual is married to the home loan seeker and is an earning member of the family, the individual can become a co-applicant. This will substantially improve the chances of getting a loan as well as increase the amount of the loan
- The home loan company determines the actual loan amount after taking into account factors such as repayment capacity, age, educational qualifications, stability and continuity of income, number of dependents, assets, liabilities, saving habits etc
- An important criteria for home loan eligibility depends on the credit worthiness of the individual. Credit Information Bureau (India) Limited (CIBIL) provides a credit score on a scale of 300-900, based on an individual’s previous credit card usage, maintenance of their bank accounts, check bounces (if any), existing loans, loan repayments and the number of times you have applied for a loan or a credit card. Individuals with a high CIBIL score are more likely to get a home loan
- The tenure of home loan ranges from 1-20 years. In some cases, loans up to 30 years tenure can also be availed. The term does not extend beyond the retirement age or 60 years, whichever is earlier (65 years for self employed individuals).
Documentation is a crucial element of the loan process. Given below is a list of basic documents required to apply for a home loan. However, the documentation requirements may vary basis customer profile, location of home, loan requirement and several factors.
List of Documents required at the time of processing:
For salaried individuals
- KYC Documents
- Salary slip for the last 3 months/Salary Certificate (If variable components like Over Time and Incentives are reflected then salary slips for the past 6 months are required)
- Latest Form–16, if salary is over Rs 20,000 per month
- Copy of all bank pass books/bank statements for the latest 6 months
- Employers profile if it is a lesser known organisation
For self–employed businessmen
- KYC Documents
- Copy of last 3 years Income Tax Returns of the applicant along with computation of income, duly attested by a Chartered Accountant
- Copy of last 3 Years Balance Sheet and Profit & Loss Account of the firm, duly attested by a Chartered Accountant
- Brief Business Profile on the Letter Head of the firm by the applicant
- Bank Statement for the last 1 year for Savings & Current A/c
- Copy of either Shop & Establishment License/VAT Registration or any other mandatory license/registration
- Copy of the Partnership Deed (if Applicable)
- Copy of Tax Deduction certificate/Form–16A (if applicable)
- Copy of Advance Tax paid/self assessment tax paid Challan
For Self–Employed Professionals
Apart from the above mentioned, for Self employed professionals the following documents are also required:
- Copy of Educational Qualification Certificate
- Copy of Professional Practice Certificate
- KYC Documents
- Salary slips for the last 3 months/Salary certificate (If variable components like overtime & incentives are reflected then 6 month salary slips)
- Passport copy with valid residence visa page
- Work Permit/Labour contract copy/Photocopy of Identity card or any other proof of work/employment issued by concerned government authorities
- Property related documents, detailed cost estimates from an Architect/Engineer (from India)
- Processing fee cheque drawn on the applicant’s bank in India or draft payable at the place where the application will be processed
- Copy of all overseas bank statements for the last 6 months, if any
- Copy of NRE/NRO bank statement of the last 6 months
- Power of Attorney (POA) if applicant is not available in India for signing documents
After home loan disbursement
- Storage of documents: It is advisable to store at least 2-3 copies of all property and loan related documents. Before handing over the original copies to the bank or a housing finance company, photocopies of all the documents should be in place.
- Intimation of change in contact details: You should inform your financier about the change in your employment, residence address, contact numbers, email ids, etc so that the company could update your contact details and keep you informed on all your loan related matters.
- EMI Payment on Due date: EMI needs to be paid on the due date to maintain good credit history. Any delay in repayment of loan EMI affects your credit history and gets recorded in the credit report which impacts your borrowing power adversely. Hence, due date of EMI should be remembered or noted to keep a check on any delay in repayment.
- Income Tax Certificate for tax benefit: All income tax certificates to avail deduction on home loan interest and principal should be filed on record in case required for income tax assessment.
- Loan under Pre EMI stage: If you buy an under-construction property, then till the completion you need to pay only interest on the actual disbursement. EMI would start after full disbursement of the sanctioned loan. You should ensure the bank is disbursing loan as per the construction progress of the project.
Contact Prestige Residency sales office to Know More @ 022 25985951 – 55