Home Loan

The home buying process can seem complicated, but if you take things step-by-step and you know how to choose the right home loan, you will soon be holding the keys to your own home! 

Ten steps to buying a home 

Step 1: Figure out how much you can afford. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. The calculators can help, but it is best to visit a lender to find out for sure. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment!

Step 2: Know your rights

Step 3: Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.

Step 4: Learn about home buying programs

Step 5: Shop for a home. Choose a real estate agent, Wish list - what features do you want, Home-shopping checklist - take this list with you when comparing homes.

Step 6: Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.

Step 7: Get a home inspection. Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.

Step 8: Shop for homeowners insurance Lenders require that you have homeowners insurance. Be sure to shop around.

Step 9: Sign papers. You're finally ready to go to "settlement" or "closing." Be sure to read everything before you sign!

Step 10: The House is yours now. Have Puja or hawan.

Terms used in Housing Finance

• EMI: Equated Monthly Installment till the loan is paid back. It consists of a portion of interest and the principal
• Floating Rate of interest: Rate of interest which varies with the market lending rate. This means that there is an element of risk of paying more than budgeted amount in case the lending rates goes up
• Monthly Reducing balance: In this system interest reduces monthly with repayment of Principal amount
• Annual Reducing Balance: In this system principal is reduced annually at the end of the year so you end up paying interest even for the portion of principal you have actually paid back
• Fixed rate of interest: Rate of interest remains unchanged throughout the period of the loan
• Processing charge: It's a fee payable to the lender on applying for the loan
• Prepayment Penalties: When loan is paid back before the agreed term of the loan, then banks/ institutions charge penalty for the prepayment
• Commitment Fee: Some institution charge commitment fee in case the loan is not availed within a stipulated period, after it is processed and sanctioned.
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• Miscellaneous Cost: It is quite possible that some lenders may charge documentation or consultant charges .

Documents required for applying for a home loan (for self employed individuals)

General Documents

1. Bank passbook or a Xerox of the statement of accounts for the last 6 months.

2. Residence & Age proof: PAN card, Voters ID, Passport and License Xerox of ration card.

3. Copy of education qualifications certificate and proof of business existence. 

4. Copy of last 3 years Income Tax returns. Last 3 years profit /loss and balance sheet, processing fees cheque. 

Documents required for applying for a home loan (for employed professionals)

1. Latest salary certificate or slip in original. 

2. Age proof : PAN card, voters ID, passport, license 

3. Copy of Form no.16 A (TDS Form) from employer. Certificate in original from employer for any other allowances, which are not reflected in salary slip. 

4. Updated bank pass book / copy of statement of accounts for last 6 months

5. Copy of your company's ID or ration card

6. Passport size photographs of applicant and co-applicant

7. Processing fees cheque