To Buy House with Home Loan is quite tedious & exhaustive process. Buying a house itself is a major financial decision. Some people delay this decision as they would like to buy their first property from own funding. Best bet is to buy house with home loan. Reason being property prices keep increasing and secondly, during the later part of life financial commitments will increase. When i bought a house, i struggled to understand steps to buy house with home loan. After going through this cycle, now i am in a position to explain step by step process how to buy house with home loan.
Step 1: Before you decide to buy house with home loan, it is important to fix the budget and arrange atleast 20% funding from own sources. Reason being banks will only lend you 80% of property cost as Home Loan. You may check my post 8 Steps Financial Planning before you buy dream Home
Step 2: Check your CIBIL Score Online to avoid any future surprises. CIBIL Score of 750 or more is must to avail home loan in India.
Step 3: I strongly recommend to apply for pre approved home loan. Reason being it is critical to know loan eligibility before finalizing the property. Loan eligibility depends on multiple factors like salary, other liabilities, repayment capacity etc. In few cases, the buyer has to call off the deal as loan approved was much lower compared to property cost. Pre-Approved loan is valid for 3 months and can be extended to max 6 months. After receiving sanction letter, request the bank to provide list of property documents required for Home Loan Disbursement.
Step 4: After loan approval, you can search and finalize the property.
Step 5 (a): After finalizing property, You can sign the Sale Agreement (by paying 1% stamp duty on consideration value) & pay token money. Token money is normally between 2 Lac to 5 lac depending on cost of property.
Step 5 (b): At the time of signing sale agreement and handing over token money kindly check all property documents in original. Get xerox of all original documents from seller & match with the list of documents required by bank for loan disbursement.
Step 6: Submit all the property documents to your Bank for Loan disbursement
Step 7: Bank will get the documents verified and loan officer will visit the site for physical verification & valuation.
Step 8: Once the loan is approved for disbursement against property, you will be called to sign the Home Loan Agreement. Carry few blank cheque leaves with you and check with bank if any other documents required at the time of signing loan agreement.
Step 9: Now you are all set for registration & buy house with Home Loan. After consulting your lawyer and seller. Inform the bank in writing /through email the date of registration. Kindly keep the gap of 7-10 days between registration & date of signing home loan agreement. Inform the bank on Home Loan cheque denominations e.g. if your loan is 50 lacs and from this amount if you need to close 35 Lacs outstanding home loan of seller. In this case, inform your bank to give 2 cheques of 35 lacs and 15 Lacs.
Step 10: Insist that you need photocopy of home loan cheques 2-3 days before registration date as seller would like to see the cheques before registration. Banks have habit of delaying Home Loan Cheque therefore collect the photocopy of cheques in advance to ensure that cheques are ready.
Step 11: Kindly inform seller to vacate the house 2-3 days before date of registration. On the date of registration, visit the house and check if it vacant or not. House should be in same condition as agreed upon in sale agreement. Take all the keys from seller and put your lock on house.
Step 12: To buy house with home loan is not that easy. On date of registration, after taking possession you should visit your bank. Collect all cheques and then you need to visit the bank of seller (To close his home loan first). You will then march towards Registrar Office. One bank executive will accompany you through out the day and will keep collecting all original documents from you as & when you will get it. It is advisable to hire good property lawyer for registration as he will complete all the legal formalities. Don’t trust the lawyer of seller.
Step 13: Once the sale deed is signed, you will also get encumbrance certificate of same date. All these documents along with stamp duty receipts will be taken by bank executive. Before handing over all originals to bank executive take photocopy of all.
Step 14: Process is not completed yet. The seller’s bank will handover original documents (submitted by seller to his bank for Home Loan) after 2-3 weeks and it is your responsibility to handover these original documents to your bank. It is advisable to take letter of authorization from seller that you will be collecting the original document on his behalf from his home loan provider.
Step 15: Submit all original documents given by sellers Home Loan provider to your bank and take acknowledgement from your bank mentioning list of all documents submitted by you to your bank. Congratulations with this you have completed all the steps to buy house with home loan.
Through this post i tried to explain all the steps to buy house with home loan in simplistic manner. I can write separate articles on each of these points but objective of this post is just to outline broad steps to buy house with Home Loan. Hope you liked it.
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