These days, lenders have become quite cautious about who they lend money to. Cases of loan default have increased over the recent past and therefore, home loan lenders take every step possible to ensure they are not lending money to someone who cannot be trusted with timely repayment of loan money. Before extending a loan agreement, lenders assess the borrower’s repayment capacity and creditworthiness by looking into factors, such as their credit score, their monthly income and current debt-to-income ratio, etc. They also make sure that the property that the borrower plans to buy with the loan money is free of all kinds of legal dispute. Lenders run checks and carry out due diligence with the help of certain documents. All lenders have a document checklist for home loan that borrowers submit if they want to be considered for a home loan.
If you are planning to apply for home loan, please keep the following documents ready to experience a hassle-free loan application process.
Documents You Will Need When You Apply for a Home Loan
To start with, let us look at all the property documents you must keep ready with you to experience a hassle-free loan application process.
Property Documents You Will Need While Applying for a Home Loan
– Sale agreement or share certificate
– Original No Objection Certificate issued under ULC Act,1976
– Land tax payment receipts
– Possession Certificate obtained from the revenue department
– Permission letter from the appropriate authority
– Possession certificate
– Certificate of non-encumbrance
– Approved floor plan
– A sketch of the property location approved by the concerned authorities
Let us now move to the income-proof documents that lenders ask for to check a borrower’s repayment capacity and ability to afford the loan they wish to avail of. These document requirements vary by whether the applicant is self-employed or salaried.
Documents Required in the Case of Salaried Applicants
– In the case of salaried applicants, lenders generally ask for a copy of the salary certificate
– Some lenders also ask for Form 16
– Income tax returns for the last 2 years
– Last 6 months’ bank account statements
Documents Required in the Case of Self-Employed Applicants
– Office ID card
– IT returns or a copy of the assessment orders for the last 3 years
– Proof of income tax payments in the form of challans
– Documents establishing proof of business address
KYC Proof Documents
Lastly, all applicants, whether salaried or self-employed, must also submit KYC documents. Under this category, lenders generally require applicants to submit the following documents.
– Identify proof documents, such as PAN, Aadhar, Passport, Driver’s License and Voter ID Card
– Address proof documents, such as electricity bill, water bill, gas bill, etc. Under this category, one can also submit a copy of their Aadhar, PAN or passport.
Please note that the list mentioned above is only an indicative list and your lender may ask you for additional documents at the time of loan processing.
Now that we have discussed the list of documents you will need to experience a smooth and hassle-free home loan application process, let us also share with you some tips on what you can do to enhance your chances of getting approved for a loan and that too quickly.
Tips on What You Can Do to Experience a Hassle-Free and Smooth Home Loan Application Process
- The credit score is a three-digit number between 300 and 900 that indicates a borrower’s repayment capacity and ability to repay loan money on time. Thus, one of the first things that a lender does after receiving a home loan application is check the applicant’s credit score. Borrowers with an excellent credit score, i.e. 750 or 900 get approved for a loan quickly and are offered the best loan terms and conditions, such as low home loan interest rates, larger loan sanctions and longer repayment tenor. So, before beginning the home loan application process, check your credit score and make sure it is at least 750. If it’s 750, go ahead with the loan application. If it’s below 750, improve your credit score and apply when it looks better.
- Before applying for a home loan, use a home loan eligibility calculator. A home loan eligibility calculator is an online tool that tells a borrower the home loan amount they are eligible for based on various factors, such as the applicant’s age, income, city of residence, etc. When a home loan applicant applies for a loan amount they are eligible for, lenders know that the chances of loan default are low and therefore, not only do they approve the home loan application quickly but also try and seal the deal as quickly as possibly by offering the borrower beneficial terms and conditions on their loan.
– Borrowers should also use a home loan EMI calculator before applying for a loan. A home loan EMI calculator is an online tool that tells borrowers their EMIs with respect to the loan amount, loan tenor and the rate of interest they wish to go for. A home loan EMI calculator helps borrowers make right decisions regarding home loans, such as what is the loan amount and EMI they can comfortably afford? What is the loan tenor that would be ideal for them? What would be the ideal time for prepayment in case they want to foreclose their loan and become debt-free quickly.
– If your debt-to-income ratio is already too high, i.e. a significant portion of your income is already going towards covering debt, lenders will doubt your capacity to repay your loan. Therefore, if you wish to be approved for a loan quickly, you should make sure your debt-to-income ratio is not too high. If your debt-to-income ratio already exceeds 40%, your loan application will most certainly get rejected. Try clearing a few small loans and bring down your debt-to-income ratio if you want to be approved for a home loan quickly.
Final Words
A home loan offers several benefits. For instance, home loan tax benefits allow borrowers to save a significant amount in taxes each year. Further, home loans allow borrowers to buy a home now and pay for it in a convenient manner and still enjoy returns in the long run. If you are applying for a home loan, know that home loan applications do get rejected sometimes. So, use the tips discussed in this article to your best advantage. Further, current home loan interest rates vary between 7% and 11%. So, negotiate hard with your lender and try and avail of the lowest interest rate possible. This will help ease the burden of loan repayment and also make loan repayment less burdensome.
