Buying a home requires an enormous amount of funds. And depending on the house you want to purchase, and you might not have enough funds to seal the deal. The solution – apply for a home loan. Securing a mortgage will allow you to cover the lacking funds to purchase your dream home. However, we are talking about tens of lakhs of rupees here. So, if you don’t understand the loan evaluation procedure and submit the relevant documents, getting a loan will remain a pipedream. This article will discuss the basic mortgage procedure and the documents you need to submit. Let’s dive in.
Documents Required to Apply for a Home Loan
To get the home loan you desire, you need to submit the correct documents to your potential lender during the application process. Let’s take a look at the list of documents you must collect to secure a mortgage.
Here’s a list of KYC documents you need to submit when you are applying for a mortgage:
- One or more passport-sized photos.
- Proof of residence. You can use these documents as proof of residence:
- Electricity bill
- Employment letter
- Ration card
- Your bank’s passbook or a bank statement with your address in it.
- Telephone bill
- Proof of identity. These documents can work as proof of identity:
- Voter ID card
- Aadhaar card
- PAN card
- Driving License
- Proof of age. You can submit these documents for proof of age to apply for a housing loan:
- Birth certificate
- 10th-grade mark sheet
- Your bank’s passbook
- Aadhaar card
- PAN card
- Driving License
Proof of Income
The lenders need to evaluate the loan repayment capability of the applicants and assess their financial stability before sanctioning the loan. That’s why you need to submit the following documents as proof of income to apply for a house loan:
- Salary slips for the last three months.
- Employee identity card.
- Form 16 and income tax return for the past two years.
- Appointment letter/ Increment letter.
- Bank account statement for the last six months.
- Business revenue records for the last three years (For self-employed individuals).
Finally, the lenders need some property documents before moving forward with your loan application. Here’s a list of property documents you can submit to apply for a housing loan:
- Commencement certificate
- Copy of an approved building plan
- Registration receipt
- Registration Agreement for property sale
- Sanction letter
- Copy of approved building plan
- A chain contract from the previous owner
- Society maintenance bill copy
- Society registration certificate
- Occupancy certificate
- Society share certificate
- Allotment letter
- NOC from the society
- A copy of the property insurance
The Basic Steps for Applying for a Housing Loan
Now, you have a clear idea of the documents you must submit while applying for a mortgage. Therefore, let’s look at the steps you need to take to get the mortgage.
Filling out the Application Form
Every single housing loan application starts with filling out the loan application form. Here’s a list of essential details that you need to enter in your mortgage application form:
- Your name.
- The address of your residence (current residence).
- Your contact details. It can include your phone number, WhatsApp number, and email ID.
- Your educational qualifications.
- The mode of your employment – salaried or self-employed individual.
- Your average monthly income.
Collecting the Right Documents
In the next step, you must submit the documents your potential lender requested. The documents include the following:
- The KYC documents
- Your last three month’s salary slip
- Income tax return of the previous two years (If you are a self-employed individual)
- Bank account statement for the last six months
- Your employee ID card
- Form 16
- Documents for proof of business for the self-employed individuals
Processing and Verification
Once you submit the application form along with the relevant documents, the potential lender will start the verification process of your house loan application form. Sometimes, to check your documents’ validity, a bank representative can visit your house and your workplace.
Next, the banks or financial institutions will evaluate your financial stability, income sources, and reliability as a borrower. In this phase, your credit history and CIBIL score will be analyzed. If all your documents are validated, and your credit score is up to the mark, the bank will continue to the next step, which is sanctioning the loan approval letter.
Once the bank approves the housing loan application, the bank will send a sanction letter directly to your home via email or post. The sanction letter proves that the bank has decided to approve your loan request. The letter will have the details regarding the approved loan, which include the following:
- The total loan amount
- Rate of interest
- The type of interest rate – fixed interest rate or floating interest rate
- Tenure of the mortgage
- Other terms and conditions regarding the loan
To accept the loan offer, you need to sign the sanction letter and send it back to the bank. Once the bank receives the signed sanction letter, the procedure will continue to the later stages.
Now, the bank will need you to pay a one-time security fee once you sign the sanction letter for the home loan. In most cases, you need to pay this fee before the loan is sanctioned and deposited into your bank account. Next, the bank will perform some technical and legal checks. After that, you will get the final agreement, and the loan money will be disbursed to your bank account.
Buying your own home is one of the most wonderful experiences you will ever have. That’s why many people opt to get a mortgage to buy a home if they lack funds. However, before you apply for a home loan, you need to understand how banks process your loan application. You also need to collect all the required documents that you need to submit during the loan application. All of this will increase the success rate of you securing the mortgage you desire.