Applicants should also submit details of existing loans and tracking statements related to EMIs being paid towards existing loans,writes NITIN VYAKARANAM
Before you chase the dream of buying a house it is necessary that you know the criteria under which the banks operate. The interest rates given on home loans differ with banks. Before applying the home loan it is important that you know the eligibility criteria for a home loan and the supporting documents you need to produce.
Before applying for a home loan it is important that we maintain a checklist of all the required documents that are to be attached along with home loan application form. The first step is to make sure that you are eligible for a home loan.
There are certain criteria for a bank to consider their application.
*Applicants should be above minimum age which varies between 21 to 25 years at the time of applying loan depending on the bank and should not be older than 60 or superannuation before close of loan tenure.
*Salaried individuals: Permanent service in government or reputed companies.
*Professionals: People in professional industries like doctors, engineers
*Self-employed individuals: Any tax paying self-employed individual.
List of home loan documents:
Make sure you have the following documents handy before applying for a loan.
Proof of identity:
All individuals who are eligible for loan should preferably provide one of the following documents as a proof of identity: Voter’s ID Card, driving licence, PAN Card or Photo Credit Card. Along with the above proofs of identity, salaried employees can also provide either Defence or Police or Government Department ID Card or Employees ID Card.
Proof of income:
As a proof of income, salaried employees should provide, salary slips of last three months showing all deductions and Form 16. Other eligible individuals should provide Income Tax returns for the last two years and computation of Income for the last two years which is certified by a CA.
Proof of residence
Eligible individuals should submit one of these documents as proof of residence:
Bank account statement, latest electricity bill/water bill/piped gas monthly bill, latest mobile or telephone bill, latest credit card statement, employer’s letter certifying the current mailing address, existing house lease agreement, registered lease or leave and licence agreement with a utility bill, ration card or latest property tax/water tax bill.
In addition to above mentioned documents, eligible individuals should submit last six months of bank statement. They should also submit details of any existing loans and tracking statements related to the EMIs being paid towards existing loans.
Banks charge a processing fee for every home loan application which is non refundable. The processing fee varies from bank to bank.
On an average it is charged as around 1 per cent of the total loan amount.
This fee is used by the bank to start, maintain and complete various processes associated with loan processing.
Evaluation and address verification:
After providing the bank with required documents and processing fee, bank assesses the application to decide the amount of loan you can get.
The general thumb rule is the down payment is 20 per cent of the house cost. So if you want to buy a house worth Rs.40 lakh, you have to pay 8 lakh and you can get a loan of 32 lakhs.
But it is not necessary that banks give you 80 per cent of the amount as home loan. There are a set of guidelines based on which banks issue their home loans.
They generally advertise saying you can get 60 times the monthly net income as loan amount.
That is if your post tax income is around Rs.60,000, you are eligible for a loan amount of Rs.36 lakh. But when you actually apply for loan and pay the loan processing fee, you find that the final amount being given by bank is less.
The reason behind this is various components of your pay slip which include Basic Salary, House Rent Allowance (HRA), Conveyance Allowance, Performance Bonus, Provident Fund (PF) and Leave Travel Allowance (LTA).
(The writer is Founder and CEO, Artha Yantra)
(Next week: Property related documents for home loan)