Along with property documents, you will have to submit various identity and income proofs
Saurabh Kumar | Mon, Jul 29 2013. 06 58 PM IST| LiveMint.com
Srikanth Valthelli, a 29-year-old Bangalore-based information technology professional, booked a flat along with his mother back in 2008. But since his mother was not going to pay any part of the equated monthly instalment, the lender initially had only asked for an identity proof. “I was only asked to submit her identity proof and so I gave a copy of her Permanent Account Number card. However, at the time of sanctioning the loan, I was asked to submit a local address proof for my mother,” says Valthelli. The problem he faced was that his mother was from another city. The issue was sorted later, but not before causing anxious moments for him. Though there is no standard format, we list out the most important pieces of paper that you need to submit to secure a home loan.
Once you have zeroed in on a property and booked it by paying the earnest money to the developer, you may require to secure a loan from a lender. When you approach a bank or a housing finance company, the first thing that they ask you is the agreement for sale. This agreement is done between the buyer and seller of the property.
If it is a pre-approved project—the lender already knows about the project and has acquired necessary documents from the builder—then you do not need to provide papers such as title deed or master plan. “At present there is no standard documentation provided to customers and it varies from builder to builder. However, the industry along with the regulator is mulling to come up with a standardized set of documents,” says Sunil Dahiya, managing director, Vigneshwara Developers Pvt. Ltd, a New Delhi-based real estate company.
If you are buying from an individual, then the lender will ask for the chain of title deeds—papers proving the proper chain of title transfers to ascertain there is no litigation. Also, since this is not a known project for the lender, they may also do an independent enquiry. “However, remember that even if you fulfil all the criteria of the lender but if the property papers are not clear, the bank may reject the loan application,” says Uday Dhoot, deputy chief executive officer, International Money Matters Pvt. Ltd, a Bangalore-based financial planning firm.
Proofs to be submitted
The lender will also ask you for your income documents such as your salary slips for the past six months, proof of income tax returns for past few years, identity and age proof, and your bank statement for the past six months.
However, this may vary from bank to bank. The lender will gauge through your savings how you plan to finance your purchase—how much down-payment will you make and for what tenor are you taking the loan. “If a 55-year-old is asking for a 10-15 years loan, possibly the bank will reject it,” says Dhoot. In this case, however, the lender may be ready to disburse a loan for a shorter tenor but then the monthly payout may spike sharply. In your bank statement, the lender will see the periodicity and regularity of income, savings behaviour and other commitments—loans or any other regular payment made. This will give the lender a fair idea about your repayment capacity and accordingly a loan sanction limit is set.
Banks will also access your credit score before offering a loan. “Credit score is used to know the credit worthiness of the loan seeker. So prior loans and credit card repayments make up the score. However, savings bank account details are not included in the score as it does not say much,” says Harshala Chandorkar, senior vice-president, Credit Information Bureau (India) Ltd.
Also, at times your source of income also becomes important. “Say, if you are salaried then the company you work for also plays a role. If you work for a big and famed organization then not only can you get a lower interest rate but your chances of securing a loan also increases,” says Dhoot. This is because the lender is assured that you are a high-performing individual with a stable job. Though, this may not be the criteria for all banks.
Keep in mind
Remember to check the property papers required before paying the earnest money to the developer because failing to secure a loan and paying for the property will mean that you will have to let go of the earnest money paid.
For instance, Valthelli applied for the loan in 2008 and the loan was sanctioned in 2009. The lender asked him to get a fresh letter from the employer dated 2009.
“There is a lack of standardized documents that even lenders ask. In the absence of the same and till some guidelines are laid, buyers should first ascertain that they have proper documents before booking a property,” says Dahiya.
However, standardizing forms may not be that easy. “It will be difficult to standardize them across the country as different states will have different requirements, say for title deeds. However, maybe at the state level this can be possible,” says Riten Ghosh, general manager-home loans, State Bank of India. He, though, further adds that if the regulator comes with a standard format which complies with know-your-customer and other norms, then all banks will be ready to comply and it will be much easier for customers as well.
Till time there is clarity on standard papers required, make doubly sure of what papers will be required to secure a loan. Though you should always be ready for surprises.
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