home loans procedure from indian perspective

1. HOME LOANS

2. INTRODUCTION
A loan given by a bank, mortgage company
or other financial institution for the purchase of
a primary or investment residence.
The owner of the property (the borrower)
transfers the title to the lender on the condition
that the title will be transferred back to the
owner once the payment has been made and
other terms of the mortgage have been met.
A home mortgage will have either a fixed or
floating interest rate, which is paid monthly
along with the principal loan amount.

3. IDEAL HOME LOAN TENURE
The tenure is long - may vary anywhere between five and 20
years. Most borrowers prefer to go in for a longer tenure rather
than a short one. The repayment through EMIs depends on the
tenure of the loan and amount.
Longer the loan tenure, lower the EMI. Shorter the loan tenure,
higher the EMI. Of course, going by the same logic, for shorter
loan tenures, the interest amount paid is also less as against the
longer tenure loans, where the interest amount increases.

4. ELIGIBILITY FOR HOME LOAN
Different banks have different eligibility criteria, however, we can broadly classify
them into the following buckets:
1. Monthly Income
One of the most important considerations when a bank decides the maximum loan
amount it can disburse, is through monthly income .
The loan amount basically depends upon the net income of an individual and a bank
usually provides home loans up to 60 times of an individuals net income. For e.g. if a
person take home salary is Rs 30,000 he /she may be offered a home loan of around
Rs 18 lacs. However, the finality of this decision is based on a few other criteria.
2. Other EMI
If you have any previous loans or EMIs pending, a bank will always consider the
risk and the financial load you are taking on to decide to give you a home loan.

5. 3. Available Income
The income that is left in your bank account after deductions of any EMIs is a very important
consideration for giving out a home loan. The Home Loan Eligibility Calculator will be
calculated after deduction of the EMI’s that you are paying monthly.
4. Property Attributes
If you are a home owner already, you should know that banks provide upto 75% of your
home property value as a loan amount.Here, based on your income and property value banks
decide your exact home loan eligibility.
Banks also have certain norms for the property before granting a loan. These are with respect
to the minimum area requirements for a flat which may be carpet area or built up area. The
bank also considers the age of the property in case of an existing property, the location of the
property and also the reputation of the builders constructing the property.
5. Credit History
The credit history of an individual plays an important role in deciding the amount of the loan.
Credit history is basically the credit report of an individual based on credit information
recorded by CIBIL through all your loan transactions. Based on your credit score, a bank or
any other financial institution decides whether an individual is eligible for a loan or not.

6. 6. Age
Age plays a crucial role in determining your eligibility for a home loan. One has be
atleast 21 years of age to apply for a home loan. The minimum age requirement may
be different for different lending institutions. The maximum age may vary from 58 to
65 years depending on the income source of the individual. Age also determines the
tenure and EMI of the loan. The longer the tenure the lower will be the EMI’s.
However the longer the tenure, the costlier the loan is as one ends up paying more
interest.
7. Co-applicant
In order to enhance the eligibility for having a loan one can have a co-applicant such
as a spouse or close nominated relative or friend. As a result of this the total eligible
income for having a home loan increases and thus as a result the loan eligibility
becomes higher. However banks permit only certain relationships to become the co-
applicant.

7. HOME LOAN TERMS
1) Margin
When you take a loan, the home loan company will not put up the entire amount. It
will only put up around 80% to 90% of the cost of your home.
You will have to put in the balance 20% or 10%.
Even if they go up to 95%, you will still have to put in the balance 5%.
This amount is called the downpayment or the margin.
2) Resale
This is the term used when you are buying a home from someone who already owns
it and is selling it. Hence it is referred to as a resale.
It indicates you are not buying a brand new home straight from the builder or buying
one currently under construction.

8. 3) Credit appraisal
The home loan company will take a look at a number of parameters before a loan is
sanctioned. Your savings, income, age, qualifications, nature of work and work
experience are some of them.
They will also look into how many loans you are currently servicing.
Taking all these issues into account, they will determine whether or not you are
eligible for a loan and what the sanctioned amount should be.
This process is known as a credit appraisal.
4) Pre-approved property
Many builders get their properties pre-approved by home finance companies.
Generally, if a builder gets pre-approved by a number of players, it speaks well of
the builder.
The home finance company will examine all the legal documentation and approvals.
If everything is in order, the builder will get a stamp of approval. Also, the home
loan player will view the builder's ability and track record to complete the
construction in time.

9. 5) Equated Monthly Installments
An EMI is the amount of money you will have to pay every month in order to repay your
loan.
The EMI remains constant throughout the repayment period.To arrive at the EMI, the home
loan financier will look at
The principal (the actual loan amount).
The repayment period (the number of years you will take to repay the loan).
The rate of interest.
How the rate of interest is computed (monthly reducing, quarterly reducing or annual
reducing basis).
6) Disbursement Full disbursement
A full disbursement is when the entire cost is paid at one go; the home loan company hands
over the entire payment to the seller.
The cheque is disbursed (it is never in cash) only when you have submitted all the documents
required and have made the downpayment.
Partial disbursement
A partial disbursement is made in stages (not at one go as in the case of full disbursement).
When purchasing an apartment from a builder and it is under construction, the home loan
company will not release all the payment at one go. The money will be released in stages.

10. 7) Advance Disbursement Facility
If the house is still under construction, then a partial disbursement is made.
However, in some cases, the home loan company may be willing to make the entire
payment even if the construction is not complete.
This is known as an advance disbursement and will occur only in both these
instances:
i. If the buyer requests the home loan company to do so.
ii. If the home loan company is fairly convinced the builder will complete the
construction on time.
8) Pre-EMI
When you buy a home that is under construction, the home loan company will not
pay the entire amount to the builder.
Payment will be made in stages. As construction is completed, payment is released.
This is known as partial disbursement.
You start paying your EMIs only after the final disbursement. Till then you pay the
home loan company a rate of interest on the amount partially disbursed. This
interest is called pre-EMI.

11. 9) Offer Letter
Once the loan is sanctioned, you will get an offer letter stating a number of details.
•Loan amount
•Rate of interest
•Fixed/ flexible rate of interest
•Tenure of the loan
•EMI amount
If offered under a special scheme, details of the scheme
Any other conditions of the loan
This letter does not mean the loan is yours. It only means the home loan company has agreed to consider you
as one of its customers.
It will then look into the various property and legal documents as well as value the property you are buying.
The loan will only be disbursed once these formalities are complete.
10) PDCs
Post-dated cheques are dated ahead of time and cannot be processed till the date indicated.
Generally, the home loan company will ask for a year's supply of cheques or maybe even two or three years.
At the end, you will have to replenish the supply for the following years.
These cheques will be addressed to the home loan company, signed by you and will state the exact EMI to be
paid.

12. Bank Name Floating Interest rate Per lac EMI
Processing Fee Prepayment Charges % Change in last 6 mths
SBI - State Bank Of India 9.70% (For Women), 9.75% (For
Others)
Rs.945 (For Women), Rs.948 (For
Others)
Up to 25 lacs : 0.25% of loan
amount minimum Rs.1000/-
25-75 lacs : Rs.3,250/-
75 & above : 5,000/-
Nil
1.52%
ICICI Bank 9.85% (For Female), 9.90% (For
Others)
Rs.955 (For Female), Rs.958 (For
Others)
0.50% of loan amount upto 1
crore
N.A
1.44%
HDFC Ltd TruFixed Plus Loan: 9.95% -
10.45% (Fixed for 2-3yrs)
10.05% - 10.55% (Fixed for
10yrs)
else 9.90% - 10.40%
TruFixed Plus Loan: Rs.961 -
Rs.995 (Fixed for 2-3yrs)
Rs.968 - Rs.1001 (Fixed for
10yrs)
else Rs.958 - Rs.992
0.5% or maximum
10,000+service tax (12.36%)
No prepayment charges shall be
payable for partial or full
prepayments irrespective of the
source
1.98%
LIC Housing Scheme 1: Up to 3 cr 9.90( Fixed
for 2 years)
Scheme 2: Up to 75 lacs :
10.25% (Fixed for 5 years)
Scheme 3: Above 75 lacs :
10.50%( Fixed for 5 years)
Rs.972 (Fixed for 2 yrs) Up to 50 lacs : 10,000 +(Service
tax)
50 lacs & above : 15,000
+(service tax)
No Processing fees for Women
(till 31 March 2014)
Nil No Change

13. TYPES OF HOME LOAN
The Home Loans that are available in the market have different criteria
to avail. The following is the list of different types of Home Loans you
can avail from the market:
Home Purchase Loans
Home Construction Loans
Home Improvement Loans
Home Extension Loans
Home Conversion Loans
Land Purchase Loans
Stamp Duty Loans
Bridge Loans
Balance Transfer Loans
Refinance Loans
Loans to NRIs

14. Home Purchase Loans:
Home Purchase Loans are the basic home loan you can opt for purchasing new home.
This type of Home Loan is offered by all kinds of Banks and HFCs.
Home Construction Loans:
Home Construction Loans are especially meant for the construction of a new home.
Formality of availing this loan has a little different from the normal Housing Loan.
The plot on which the construction is being erected is purchased within a period of
one year, the cost of the plot is then also included as the component for the valuation
of total cost of the property. But in case the date of purchase exceeds one year to the
date of application the above condition is not applicable.
Home Extension Loans:
Home Extension Loans is offered for meeting the operating cost of alteration to an
existing building. Extension here means addition of an extra room etc.

15. Home Conversion Loans:
Home Conversion Loans are offered to those who want finance for the purchase of
another home by converting the already existing home and on which loan is already
sanctioned. Through this loan, the existing loan is transferred to the new home
including the extra amount required and there is no need for pre-payment of the
previous loan.
Land Purchase Loans:
Land Purchase Loans can be availed for purchasing land for both home construction
as well as investment purposes.
Stamp Duty Loans:
Stamp Duty Loans is offered for the payment of stamp duty in the transaction of the
property.
Bridge Loans:
Bridge Loans are offered for selling the existing home and purchasing of another. The
bridge loan assists in the finance of new home, until a buyer is found for the old
home.

16. NRI Home Loans:
NRI Home Loans are meant for Non-Resident Indians who wish to build or buy a
home or property in India.

17. DOCUMENTS REQUIRED FOR HOME
LOAN
Income proof
Age proof
Identity proof
Address proof
Employment details
Proof of educational qualifications
Details about the property if finalized
Bank statements
the requirements may vary from bank to bank

18. Best Bank for Home Loan in India
(Survey Results)

19. THANK YOU