Housing Finance step by step procedure to facilitate home loan process

When people plan a house as their dream house through Housing Finance, they prefer good location with easy accessibility of utility services like hospitals, medical shops, general stores, schools and good transportation facilities.

However, when we plan a house as one of the investment opportunities through Housing Finance, alongwith the above, also give importance to: its regular future cash flows in the form of House Rent, capital appreciation, EMI burden and tax advantage so that ultimately it would build good wealth for us.

Whenever we plan for a house as our dream house or any investment option, we are often excited and worried at the same time. This is mainly due to huge amount is involved in the said project and its process complications.

Therefore, we have decided to make this Housing Finance process simple for you by providing step by step guide for your Housing Finance Project.

I have already explained in my one of the posts that how to estimate the monthly expenses while estimating Housing Finance and estimate the Housing Finance Project cost and loan component.

Now, here we talk about steps for Housing Finance as under :-

1. Token money and MOU at the time of finalisation of House Property

After finalisation of house and price consideration for your House Property, finalise the token amount. Buyer expects to keep the token price always on lower side on the other hand seller expects to keep it on higher side. However, the buyer should keep the price always on lower side because if anything goes wrong in future like title documents issue, litigation against the seller, bank’s dues issues of seller, dispute between the joint owners of property, he can cancel the deal.

Usually, at the time of giving token for the deal, it is advisable to sign a Memorandum of Understanding (MOU) between the parties (buyer and seller). Most of the seller wants to put the clause in MOU that if the deal would be cancelled in future, he will forfeit the token. Hence, at the time of signing of MoU, this clause should be cancelled. Most of the seller usually returns the token, if deal gets cancelled.

2. Ask for copies of title documents for Title Search and Valuation Process in the Housing Finance

Once the token has been given to the seller, ask for following copies of documents which is mandatory and facilitate in the processing of Housing Finance at Bank in respect of Title Search Report and Valuation Report etc.:-

1. Blue Print copy of Plan (IOD — Intimation of Disapproval) duly signed and stamped by statutory authority of that area;
2. Commencement Certificate (CC) stands issued by statutory authority of that area;It is pertinent to mention here that the Reference No. on IOD and CC should be tallied.
3. Chain of Title documents (All Sale Deeds or Agreement for Sale) in respect of property proposed to be purchased;
4. Latest maintenance Bill, Electricity Bill, Property Tax Bill etc. These documents need to be verified that there is nothing overdue against the said property.
5. Registration of Society Certificate, if society is formed;
6. If the you are purchasing the property from Builder, then instead of documents listed at №4. And №5. you have to ask for the following documents :-
7. If the Developer is a Company then you have to ask for Memorandum and Article of Association or if the Developer is a Partnership Firm then you have to ask for Partnership Deed;
8. Land Development Agreement executed by Developer with Land Owner;
9. Title Search Report of Land;

3. Prepare your Housing Finance File;

Once you receive the above documents, prepare your Home Loan File. You have to compile the ab ove documents alongwith the following documents to submit the said to the Banker for the processing of Housing Finance :-

1. KYC documents of Buyer. If you want to purchase the said property jointly with your Spouse (Co-Borrower), then you have to also submit the KYC documents of Spouse to the Banker. The KYC documents include Pan Card, Aadhar Card, Photograph and Residential Proof like Electricity Bill, Gas Bill etc.;
2. Income Documents, if the Borrower/Co-Borrower and if the Borrower/Co-Borrower is a Salaried employee then ;
3. Last Six Months Salary Slip;
4. Past 2 years Form 16;
5. Last 1 year Statement of Salary Saving Bank account;
6. Past 2 years IT Returns;

And If the Borrower is a Business Person then;

1. Last 2 years IT Returns and CA Certified Balance Sheet, P&L Account with all schedule if Business turnover is less than Rs.2 Crores and if business turnover is above Rs.2.00 Crores then Audited Balance Sheet & Profit and Loss Statement with 3CB report;
2. Past 1 year Statement of account where business turnover is being routed through;
3. Business profile alongwith Book debt and receivables statements;

4. Approach the Bank for Housing Finance

When you approach the Bank for Housing Finance, you have to be honest in sharing your each and every personal and financial details. You also need to disclose every existing loans details alongwith existing deductions to the Banker which ultimately facilitate for early disposal of the case by the Banker. While submitting the above file, any other documents which the Banker may ask from you have to be submitted on time. If the Banker finds your Housing Finance project viable, he may ask you to sign an Application Form and ask to submit one-time processing Fee which ranges from 0.20% to 0.25% of the loan amount alongwith GST.

Once Banker receives the processing fee, he renders your property documents for carried out Search and Valuation of that property. Search Report gives details about any issue/problem in respect of any property documents, check legal status of property and any encumbrances over the property etc. whereas Valuation Report gives details about Market Value, Forced Sale Value of property. The valuation decides the Security Coverage of the Housing Finance.

The Banks usually outsource the Search, Valuation and KYC Verification task. The verification guy may visit your Home for KYC verification and proposed property for valuation. You can ask the Bank for in-principle approval on the basis of your income details before the process of search and valuation to show the same to Seller / Developer to reveal your financial viability to conclude the project.

5. Payment of margin money to Seller and registration of documents

Once you receive okay from your Banker or receive an in-principle sanction, you can pay the margin money (Total Consideration (-)Less Loan component) pending housing finance component.

You can ask now to the seller for Registration of the property by executing the Sale Deed / Agreement for Sale.

The Buyer and seller have to sign the said documents with the concerned Registrar Authority of an area where property is located by payment of necessary stamp duty and registration fees .

You, as a Buyer, don’t have to worry about the said procedures, since the Brokers and Developers are very well aware about the said procedures.

Once you finish your registration, the registrar gives the hard copy of Sale Deed / Agreement for Sale within 2 days to the Seller which he can retain with him alongwith other title documents subject to the disbursement of Housing Finance component or he can render the same to you (keeping the other chain of title documents with him) to give it to your Banker for verification purpose.

6. Ask for Society NOC for Bank’s Housing Finance

At this stage, the Buyer needs to submit to its Banker the NOC from Society in case of resale property and from Developer in case of fresh property to be purchased from Developer. Society/Developer confirms through NOC the Bank’s charge on the said property and also confirms un-encumbrance over the said property. Society /Developer also confirms therein that they would not allow the proposed purchaser to sale the property without Bank’s confirmation. The Society/Developer’s has to give the said NOC on its own letter head duly signed by an authorised person/s of the Society / Developer.

If the property is in the custody of Developer means Society is not yet formed. In such case, the developer also confirms in the NOC that he will intimate the society about Bank’s lien/charge over the said property once the society gets formed.

7. Execution of Housing Finance documents, Housing Finance cheque and custody of original title documents of the property

Meanwhile, Banks complete its processing and convey sanction to you. Most Banks ask both the seller and Buyer (Borrower) to attend the Bank alongwith the complete set of original title documents. This is a final process where the Borrower has to execute the necessary legal / security documents in respect of Housing Finance. The concerned Bank personal after verification of original title documents takes the custody of the said documents and handover the Loan Cheque to the Seller.

Some Banks sometimes ask you to get the original title documents (chain of title documents) in advance from Seller and submit the same for verification purpose at Bank.

After verification, they handover the Housing Finance component cheque to you to give it to the seller.

8. Take possession of House Property and completion of transfer formalities with the Society

Finally, the seller and buyer need to complete the transfer formalities with the Society. The Buyer and Seller need to sign the set of transfer documents in the presence of Society authorities and handover the same to the concerned society persons.

The Buyer and Seller has to bear the Transfer Charges in the ratio of 50:50 (approx from Rs.15000/- to Rs.20000/- each). It is pertinent to mention here that Buyer should not forget to mention the Nominee details in the transfer documents.

Originally published at https://loans-review.com on May 29, 2020.