Home Loan Process in India

I recently went through the process of taking a home loan from a private bank in India. Generally, the process is simple and straightforward, however, there are some important points in each stage of the process that will help any borrower going through this process. In this article, I will describe the home loan process followed by Indian banks along with some tips to help you make the process as smooth as possible.

Type of Bank

In India, you can take a home loan from a public or a private bank or an NBFC (Non-banking Financial Company). Many people prefer to go with public banks such as SBI or NBFCs such as LIC. It doesn’t matter who you go with. In general, all of them offer very competitive rates and decent service. However, it would be preferable to go only with large entities.

Salaried Vs Self-Employed

All home loan providers provide loans to both salaried as well as self-employed. However, self-employed people are generally offered a slightly higher interest rate compared to salaried people due to the perceived higher risk of default from the self-employed. Self-employed borrowers are also required to produce many more documents compared to the salaried borrowers (We’ve described these documents later in the article.

Pre-approved Projects

You can take a home loan for an under-construction project, a read-to-move apartment, or even an independent house. While taking a loan for an independent house, it’s okay to approach any bank of your choice. However, if you are purchasing an apartment, it really makes things easy to go with a bank that has the apartment project pre-approved. Each builder when they start a project get their project pre-approved by a number of banks. As a part of the pre-approval, a lot of legal and regulatory paperwork is completed. So, when you take loan for a pre-approved project, the legal verification and the site-level technical verification is already done and saves you time.

The Process

Step 1: Initiate Home Loan

The first step in the process is to apply for the loan. You can call up the bank or approach a branch near to you. Now-a-days all banks provide you at-home service. So, for all documentation, the bank personnel will come to your home and complete the process. In most cases, you don’t have to visit the bank branch at all. So, talk to the bank and fix an appointment for a convenient date and time. Before coming, someone from the bank will talk to you over phone to understand your requirements, will explain the process to you and the required documents. You can also ask the bank person to come to your home and discuss this. However, it is best that you understand the documents required over phone and collect all those documents before proceeding with the application. You can also discuss your salary/income with the bank employee so that he can give you a quick estimate of loan amount eligibility. Note that at this stage you need not have selected a property. You’re just applying for the home loan. Once you have applied and your loan is approved, each bank will give you a period of 3-6 months in which you need to select the property and get your loan disbursed.