Buying a home is the ultimate dream of most people in the country, and a majority of the homes bought are funded by home loans. In this context, it’s important to be aware of certain nuances about the product before one applies for it as these may act as roadblocks to owning your dream home, and may lead to unexpected rejection of your home loan application.
Use the below as a checklist, in addition to all the necessary documentation before applying for a home loan:-
Check the builder’s approval status: Not all banks fund loans for properties of all builders. It is critical to understand from the builders which banks have approved them and which have not, as it’s possible that when you have decided to buy a property and go back to your banker and check, you realise that the builder is not approved with your banker making it impossible for you to get a home loan on the same from your bank.
Check the property’s approval status along with builder status: This is another unexpected reason in home loan rejection, where a builder may figure in the list of approved builders of the bank, but a specific project launched by the builder may not be approved. In addition, there are cases where particular phases of the property( if it’s a large project) may not be approved by the banker as well, so it’s important to check if the builder, the project and even the phase of the project is approved by the banks to avoid unexpected home loan rejections.
Check your credit history before applying for a loan: Most customer do not check their credit scores regularly and are mostly oblivious to the same, there can be some old payments missed by customers or some past challenges the customer may have had, which they have forgotten about. The same can be adversely affect ones scores, and a poor credit score and performance can lead to rejection of home loans. It’s very important that customer regularly check credit scores and fix issues if any around poor credit history immediately.
Check for property valuations: Imagine a scenario where one is buying a house from the resale market. The buyer and seller mutually decide a price of the property and the buyer decides to go for a home loan to fund the purchase. At the time of sanctioning the home loan, the bank would fund the loan basis the valuation of the property as ascertained by them rather than the price decided by the buyer and the seller.
If the valuation amount is higher than the mutually decided price then there is no issue, however if the value is lower, then the bank may choose to give a lower loan amount than required, or may reject the home loan application as well.
Check for legal status of the property before buying: The bank does a detailed check on the property before giving a home loan which goes far beyond just ownership related legal checks which most buyers of property focus on. The bank checks on encumbrances, property documents, sanction plans, construction plans, government body checks and clearances, tax paid receipts etc along with ownership checks, these are mostly not carried out by buyers in a mutual agreement between buyer and seller, and can lead to home loans on these properties getting rejected if the bank does not feel comfortable basis these documents. It’s extremely critical for buyers to try to do an elaborate check on the property before applying for a home loan on the same.
Consumers looking for home loans should understand the importance of the product in their lives, most people take this once in their lifetime and pay the loan for a long period of time, in such scenario’s its critical to cover all bases from all angles to ensure that the home loan process happens smoothly.
(The writer is the CEO and co-founder of Finance Buddha)
