Home Loan Process: Step by Step

Estimated reading time: 7 minutes

Buying a home is a significant milestone, and a home loan can make it more accessible for many individuals. Understanding the home loan process in India is essential to ensure a smooth journey from application to approval. Here’s a step-by-step guide to help you through the process:

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Step 1: Determine Home Loan Eligibility

Starting your journey to homeownership is exciting, but the first step is figuring out if you qualify for a home loan. Let’s walk through what you need to consider to see if you’re ready to apply for a mortgage.

Criteria	Requirements
Age	21 years – 60/ 70 years
Nationality	Indian Residents NRIs/ POIs/ OCIs
Employment	Salaried Self Employed (Professionals/ Non Professionals)
Employment History	Lenders prefer borrowers with a steady and reliable income source.
Credit Score	750+

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Step 2: Choose the Required Loan Tenure and Loan Amount

Once you’ve determined your eligibility, the next important step is deciding how much you want to borrow and over what period you’ll repay the loan.

Determine the Loan Amount You Need:

• Access the property cost
• Determine the down payment you can afford – typically 10% – 25%
• Consider the additional fees like – processing fees, legal fees, stamp duty, etc.

Choose the Right Loan Tenure:

The loan tenure is the period over which you agree to repay the loan. In India, home loan tenures typically range from 5 to 30 years.

• Access your current monthly income and expenses
• Your EMI should not (preferably) exceed 50% of your monthly income

Calculate Your Equated Monthly Installments:

Use the Home Loan EMI Calculator to get an approximate estimate of your monthly loan repayments.

Maximse the Benefits of an EMI Calculator by:

• Entering accurate information
• Exploring multiple scenarios
• Considering the additional costs
• Staying updated on interest rates

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Step 3: Gather Necessary Documents

Now that you know where you stand with your home loan eligibility, it’s time to gather all the paperwork you’ll need to apply for your mortgage. Having these documents ready can make the application process smoother and faster.

Here are all the documents you need to collect.

Tips:

• Organise these documents in both physical and digital formats to ensure you have everything ready when needed.
• This preparation speeds up the application process and helps avoid delays.

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Step 4: Choose the Right Type of Interest Rate

The type of interest rate can significantly impact your monthly payments and the total amount you repay over the loan’s lifespan. In India, the two primary types of interest rates are Fixed and Floating.

Feature	Fixed Rate	Floating Rate
EMI Stability	Consistent throughout the loan tenure	Varies with market conditions
Initial Interest	Generally higher	Generally lower
Total Interest	Predictable, can be higher or lower	Potentially lower if rates decrease
Risk	Low risk of rate hikes	Higher risk due to rate fluctuations
Flexibility	Less flexibility to benefit from rate drops	More flexibility to benefit from rate drops

To get the best deal, compare rates from multiple banks and NBFCs and negotiate if you have a good credit score.

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Step 5: Submit Home Loan Application

You’ve checked your eligibility, gathered all necessary documents, and chosen the right lender and loan type. Now it’s time to take the next crucial step: submitting your home loan application.

Step	Details
Complete Application Form	Fill out accurately with personal, property, and loan details.
Attach Required Documents	Organize and attach all necessary paperwork.
Review Credit Report	Ensure there are no errors that could impact your application.
Fill Out Accurately	Be honest and consistent across all information.
Submit Application	Choose online or in-person submission based on your preference.
Pay Processing Fee	Budget for and pay the non-refundable fee.
Receive Acknowledgment	Keep your application number safe for tracking.
Respond Promptly	Address any lender queries or document requests quickly.
Track Status	Regularly check the progress of your application.

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Step 6: Property Verification

Before finalizing your home loan, the lender needs to ensure that the property you intend to purchase is a sound investment and meets all necessary legal and structural standards.

1. Title Verification: Ensure a clear and dispute-free title.
2. Legal Compliance: Confirm RERA registration, building permits, and occupancy certificates.
3. Property Appraisal: Verify the market value matches the sale price.
4. Physical Inspection: Assess construction quality and amenities.
5. Ownership and Encumbrances: Confirm the seller’s rightful ownership and no pending dues.

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Step 7: Get Your Sanction Letter

A sanction letter is a formal document issued by the lender after reviewing your home loan application. It signifies that the lender has approved your loan based on the provided information and documents.

The sanction letter includes essential details such as the approved loan amount, interest rate, loan tenure, and other terms and conditions.

1. Review All Details: Check loan amount, interest rate, tenure, EMIs, and other terms.
2. Sign and Accept: Provide your signature and return the signed letter to the lender.
3. Coordinate with Seller: Inform the property seller about your loan approval.
4. Prepare for Disbursement: Fulfill any conditions mentioned in the sanction letter.
5. Complete Legal Formalities: Finalize property registration and other legal documents.
6. Set Up EMIs: Arrange for the repayment schedule to start on time.

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Step 8: Loan Disbursal

You’ve reached the final stretch of your home loan journey. Loan disbursal is the process where the lender releases the approved loan amount to you or directly to the seller, enabling you to complete the purchase of your dream home.

Steps	Description
Complete Legal Formalities	Execute and register the sale agreement, transfer property title, and obtain possession certificate if applicable.
Pay Down Payment	Ensure your down payment is paid as agreed.
Provide Required Documents	Submit all necessary documents to the lender.
Take Insurance	Arrange for home loan insurance if required.
Confirm Disbursal Method	Verify whether the loan will be disbursed directly to the seller or your account.
Track Disbursal Status	Regularly check with your lender for updates on the disbursal process.
Receive and Verify Funds	Ensure the loan amount is correctly transferred.
Complete Property Registration	Finalize the legal transfer of property ownership.
Set Up EMIs	Arrange for timely EMI payments to avoid penalties.
Secure Your Home	Set up essential utilities and consider property insurance.

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Conclusion

Securing a home loan may seem complex, but breaking it down into clear steps makes it easier. From assessing your eligibility to understanding the loan agreement, each phase requires attention to detail. By carefully following the process, you can avoid common mistakes and ensure a smooth experience.

For personalized guidance on your home loan journey, Credit Dharma is here to assist. Our experts help you navigate the process, ensuring you get the best deal while fully understanding every aspect of your loan. Let us simplify the home loan process for you with expert support and advice.

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Frequently Asked Questions