Closing the Deal: A Step-by-Step Guide to Seal Your Home Loan Account

Owning a flat in a high-rise building in Mumbai might be your ultimate dream. However, as a homebuyer, you might be exploring the best financing alternatives to make this dream come true. To close the deal on your home loan account, you need to negotiate with the bank or lending institution efficiently. Additionally, it is essential to have a clear understanding of the home loan application process.

Here is a step-by-step guide to sealing your home loan.

1. Shopping for a home loan – To begin your search for the best loan product, visit the websites of various banks and reputable NBFCs. While the interest rates may be similar, you may find better terms with a bank if you have a long-standing relationship with them or may even find a zero-processing fee. It is important to compare and weigh all the options before deciding.
2. Choosing the right lender – These days, several loan apps have offers that seem too good to be true. Do not fall for fake apps and unregistered lenders. A reputed bank or finance company is your best bet for securing your finances.
3. Application process and documents required – Once you have chosen the loan product and the lender, you must collect the necessary documents, such as KYC documents, credit report, and salary statement, and apply for the loan. If you have finalised the property you wish to purchase, you will require documents like approved plans, commencement certificate, occupancy certificate, and sale intent letter as well.
4. Document verification and processing – Before approving the loan, the bank will thoroughly verify the documents you submitted with your application. At this time, the bank will make a hard enquiry to the credit agency to verify your credit score. You can also expect the lender to check your employment records and your income tax returns.
5. Property check – If you have specified the property you wish to buy and submitted the documents, like the title deed, the bank will undertake a legal check and verify the builder’s credentials. At this point, a bank representative may also undertake a site visit.
6. Offer letter – Now, the bank will send you an offer letter, and when you accept in writing, the loan amount will be disbursed. 

Things to consider when opting for a home loan

It is important to remember that a home loan is a long-term financial obligation. Before taking out a loan, consider these factors that will impact your long-term finances and wealth.

• Interest rates – The interest rates offered by most lenders depend on the RBI's repo rate. Since 2021, the RBI has raised the repo rate, making home loans more expensive. If there is a reduction in the repo rate in the future, then choosing a floating interest rate may help lower the interest on your home loan. However, if the repo rate increases, you must pay more interest. On the other hand, if you opt for a fixed interest rate, you will repay the same interest for the entire loan term.
• Staggered disbursement – If you are considering investing in a property that is still under construction, it might be beneficial to negotiate a staggered disbursement of your home loan with the lender. This means that as each stage of the project is completed, the lender will release the amount you are required to pay the builder. Additionally, you will only need to pay interest on the loan amount disbursed to you at a given stage.
• Pre-payment options - Banks may not like pre-payment as it can lead to a loss of income. A good relationship with your lender can help you negotiate better terms. You can pay off your loan early and close your home loan account if you receive a sum of money in the future. This will reduce your interest repayment burden as well.
• Joint loan applications - Having a parent or a spouse as the joint owner of the property and a co-applicant for your home loan can be a major advantage. The lender will consider both your credit scores and is likely to be more inclined to approve the loan if you are both working professionals. You may be able to negotiate better terms in this case.

Conclusion

Before applying for a loan, it is important to get all your documents in order. Making multiple applications can lower your credit score, so it is helpful to have a clear understanding of your requirements and apply for the right product. Close the deal on your home loan by meeting the ban officials and negotiating smartly.