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Understanding the Home Mortgage Process

Comments Off on Understanding the Home Mortgage Process   |   May 25, 2007    04:46pm   |Contributed by Indian Realty News

Nowadays, building a house without availing any home loan can be an uphill climb for any middleclass man. Generally, banks and house finance companies (HFCs) have a number of lucrative options to offer for the best home loan. Despite there being several of such lending institutions, shopping for home loans in India is no simple.

The expertise of the banks and HFCs actually lies in providing a positive approach in matters concerning easy housing loans. However, they never entertain any application that does not meet their specific criteria and until the applicant has good title over the property. Therefore, any individual buying home loan must comply with the procedural requirement of the lending institution. And, the next important thing is to prove the marketable title of the property.

Types of Home Loan

Applications requesting the funding for buying residential property and the purchase if site generally fill delight cup of banks and HFCs. Apart from ready to built house or flat, the financial institutions lend loan for renovation and construction of the house. Let’s have a vista in each of the options clearly:

  • Loan for constructing the house – Generally, a large number of people get loan from the banks and financial institutions for the construction of a building as per the sanction plan.
  • Loan for purchasing the land – Most banks do not consider the applications for buying house sites since the risk involved in such transactions is higher than granting other type of bank loans. Still, there are some banks which lend for house sites.
  • Loan for renovation – You can take up your house renovation with the help of a loan. The banks that provide such loans give major attention towards the applicant’s property documents and credit report.
  • Composite Loan – As the name signifies, composite Loan allows an individual to avail loan for both buying the site and for construction of a house thereon under a single application.

Financial Profile of the Individual

In the case of salaried people, loan is granted on the basis of the present net salary and only 50% of the salary will be considered by the bankers for loan repayment. The bank will also check out the total number of dependents of the applicant to ensure his/her repayment ability. Also, nearly all banks insist on providing a gurantor for the loan sanctioned.

Property Falling Within Negative Areas

There are a few negative areas defined by banks and lending institutions. If any individual wants to buy property in such an area, then he will not be granted a loan. Likewise, the property also has to fall within the geographical limits defined by the banks for it to grant the home loan.

Individual’s Age

The banks generally overlook the home loan application of any individual above 65 years. For the applications requesting higher loan amount than normally admissible, banks prefer joint applications and sanction home loans by considering the income factors of both the borrowers.

Margin Money

An individual can avail the loan up to 85% of the total estimated value of the plot. The left out amount has to bear by the applicant who requires giving confirmation regarding his capability of mobilizing the remaining amount. The actual market value and the percentage of depreciation of the property will also be taken into account before sanctioning the loan.

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