A guide to Home Loan application (India)

home_loan_compThis article is intended to help anyone applying for a Home Loan to any bank in India for purchasing an under-construction flat and not familiar with the process. Here are a few guidelines to follow.

PRE LOAN APPLICATION

  • The builder may suggest an agent from the bank (who will be handling your application). Try to avoid. If you have your own home branch with the bank in the same city, first check there. This is to ensure your loan account isn’t opened 40 KM away from where you stay and you get the right advice from the bank during the process.
  • It’s a general opinion that SBI does verification well. If you too believe that but are hesitant whether to go for another bank offering a lesser interest, just ensure some other purchaser already got a loan from SBI. This applies for new constructions only.
  • Talk to the builder on the probable date of registration and plan accordingly before paying the token money. This is to make sure you are not rushed for a hefty amount (from your share) out of the blue.
  • Confirm how much percentage from your share you need to pay by the time of registration. In most cases the agreement says you should pay 95% by registration and 5% by handover. However the builder may insist on paying the full amount from your individual share by registration. In that case plan how to break up the payments from your loan. For all practical reasons do not end up paying the full amount to the builder by registration.
  • Update the builder in advance that you will not give any Post Dated cheques under any circumstances and payments will be made as per agreement only.

DURING APPLICATION

  • In case you had to go with the bank’s agent suggested by the builder, do not give any written document at the time of application stating you will pay your full share by registration even if the agent insists. The bank has nothing to do with how and when you pay your share post agreement. It’s between you and the builder.
  • Go for a tripartite agreement. The builder may want to show in his demand letter that 95% of the flat is completed even if it is not and request bank for the full amount. This application will be handled by the same agent and he will release the full loan amount in one shot. Make sure your loan amount is given to the builder in the phases you dictate and as per the agreement.
  • Life Insurance is not mandatory as per RBI rules. Depends on your choice. Clarify at the beginning. In case you do not want it but the bank insists tell them straight away you would rather apply to another bank.
  • General Insurance is mandatory. Confirm how much amount will be charged on the day of the bank appointment (documentation).
  • You are not bound to take credit card or any other services the bank may offer you shortly after the loan application.

POST LOAN SANCTION

  • Complete your registration process. Make sure the percentage mentioned in agreement is paid to the builder. Collect the Encumbrance Certificate from the Sub-Registrar office on the date of registration.
  • Upon handover, make the full and final payment. Complete the Khata transfer process as soon as possible.

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