Home Loan Process

By: EconomyWatch Content   Date: 21 January 2010

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 Not all good things in this world come free. Buying a dream house would require an individual to stretch and empty bank accounts and all other savings. However, an alternative method is to finance the home purchase. In a highly competitive market, home loan process has become less complex and less time consuming.

 

Home Loan Process: The Beginning

The home loan process begins with an individual searching for a perfect home loan product. There is a large scope of saving money, particularly miscellaneous expenses, in home loan products. Thus, comparative marketing is the key to savings. Also, consider the following factors while selecting a mortgage lender:

 

  • Interest rates - fixed or floating
  • The amount of loan available
  • The period of a loan
  • Tax benefits, if any
  • Prepayment charges

 

The next step is to formally apply for a loan with a selected lender. A loan application form requires the following information:

 

  • Source of income, along with proof
  • Age proof
  • Identity proof
  • Address verification document
  • Employment details
  • Property details for which a loan is required
  • Bank statements for last few months
  • Tax statement

 

Here, an individual has to pay loan processing fees.

 

Home Loan Process: Verification and Offer Letter

At the second stage of the home loan process, the lenders examine the application and attached documents. This exercise helps to judge the financial soundness of the applicant. They also examine the applicant's credit report available with the local credit bureau.

 

If the applicant satisfies the eligibility standards set up by the lender, the request for a home loan is approved. This is followed by an offer letter to the applicant.

 

Home Loan Process: Meeting Legal Standards

Most of the countries have a standard legal procedure for home loan process. Once the loan is approved, the lenders process the loan as per the local legal norms. This includes:

 

  • Preparing legal documents
  • Valuation of property
  • Registration of property under borrower's name
  • Filing property purchase papers
  • Signing loan agreement

 

Once the legal procedures are completed, the lender disburses the loan to the borrower. The loan amount is either transferred to the bank account of the borrower or paid directly to the original seller of the mortgaged property.


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