Home Loans Explained: Types, Process & Step-by-Step Guide for 2024

 

Discover everything about home loans, including types, eligibility, the application process, and expert tips to secure the best mortgage deal in 2024.

Also read: Understanding Different Types of Loans: A Complete Guide to Make the Right Choice

Home loans: what are they?

One kind of loan specifically created to assist you in financing the acquisition of a real estate property is a house loan, sometimes referred to as a mortgage. The money you need to buy your house is provided by a lender, such as a bank or other financial organization when you take out a home loan.  Purchasing a new home or apartment, purchasing a piece of land on which to build a house, or even renovating, expanding, and repairing an existing property are all possible with a home loan.

Types of Home Loans

1. Construction Loan

If you already own a piece of property and need funding to build a house on it, this is the best kind of home loan.  Rather than providing you a lump sum payment upfront, the lender will usually pay the contractor or builder directly as the project moves along when you take out a home loan. This is called a draw system, and it guarantees that the money is being spent properly and that the construction is moving forward according to schedule.

2. Home Loan to Purchase Property

You might need to take out a home loan to assist pay for the purchase if you're thinking of purchasing land. Home loans can be used to buy raw land for construction or other uses, even though many people believe they are only for buying homes. The lender will evaluate your creditworthiness and the property's value when you take out a home loan to purchase land to set the loan's terms and conditions.

3. Balance Transfer for Home Loans

If you are dissatisfied with the service provided by your current lender or find the interest rate on your home loan to be too high, you can transfer the remaining debt to another lender who provides better service and a cheaper interest rate. Even the possibility of a top-up loan on your current loan can be investigated upon transfer. 

4. NRI home loan

An NRI home loan can be available to you if you're an NRI (non-resident Indian) wishing to buy real estate in India. Documentation proving your NRI status, together with verification of your income and creditworthiness, is usually required when you apply for an NRI home loan.

Step-by-Step Guide to Getting a Home Loan

1. Qualifications

Make sure you are qualified for the loan before starting the home loan application process. The bank takes into account several variables, including your age, job status, income, and monthly expenses, before deciding if you are eligible for a housing loan.

2. Gather Required Documents

fill out the application form, This form includes: 

* Personal Details

* Date of Birth(DoB)

* Last 6 months Bank Statement

* Employment status

* all documents of the property for which the loan is required.

* rate of the property

3. Make the processing fee payment.

You have to pay a processing charge, usually between 0.25% and 0.50% of the loan amount, to proceed with your application. Following payment, you will be given a loan account and need to supply certain private documents annually, including postdated cheques and income tax certificates.

4. Verification of documents

The bank will carefully examine every document you provide. Representatives may come to your home to verify information and evaluate your borrower's credibility. the bank will check: 

1. personal contact Number

2. Residential Contact Number

3. workplace Documents

5. Procedure for loan sanctioning and approval

Your paperwork will be thoroughly examined at this stage to approve the loan. The bank will evaluate:

* 3-year income tax return

* property documents

* adhar card

* NOC(Non Objection Certificate)

* Income

6. Technical evaluation and site assessment

The bank will inspect the property site to gauge the level of construction quality and project how long it will take to finish. There can be an extra charge for this estimate.

7. Final loan contract

The lawyer will draft, review, and stamp the final loan agreement after the technical evaluation is finished.

8. Execution Memorandum (MOE)

At this point, you will sign the house loan contract and turn in the original property documents and the necessary check. There may be video evidence of this procedure.

9. Disbursement of loans

The loan amount will be paid out by check once the required paperwork has been signed and all legal checks have been completed. Important paperwork attesting to your contribution to the property must be submitted. 

FAQ'S

1. How long does an average house loan last?

The term of a home loan typically ranges from 10 to 30 years, depending on the borrower's financial situation and preferences.

2. Can my house loan be paid off early?

Most banks accept prepayment, though some can impose a penalty.

3. What occurs if an EMI payment is missed?

In addition to penalties and higher interest rates, missing an EMI payment will lower your credit score. You can easily navigate your home loan journey and get your dream home by knowing the procedure and making sensible plans.