Even if you have sufficient funds to buy a house, a loan offers benefits such as saving tax, ensuring enough liquidity, and the opportunity to let your funds grow. This means, taking a loan is always a good decision for individuals with a high income and good credit background. A home loan is an installment loan where the repayment is complete with monthly installments till the end of the loan term. However, considering the high value involved in a loan it becomes essential to do the documentation in the right manner.
Loan providers take documentation for a home loan on a serious note to validate and authenticate the entire background verification of the homeowner and the property. It becomes very essential to validate all the information and legal procedure involved in investing. Therefore, it becomes very important for the loan provider to get the documentation done in the right manner to invest in the right property and offer a loan to the responsible borrower. If you are borrowing for the first time, listed below are all the documents and other eligibility factors that play an important role when you apply for a home loan.
List of KYC Documents for Home Loan Application
Photo ID Proof
- Passport
- PAN Card
- Driving License
- Voters ID Card
Residence Proof
- Electricity Bill
- Ration Card
- Telephone Bill
- Employment Letter
- Passbook or Bank Statement with address
Age Proof Documents
- PAN card
- Passport
- Birth certificate
- Driving license
- Bank passbook
- Mark sheet from 10th class
List of Documents Required for Loan Guarantor
Identity proof
- Personal assets
- Liability statement
- Two passport size photographs
- Proof of residential address
- Business address proof
- Signature identification from the present banking institution
Important documents for a home loan
- Identity proof
- Residence proof
- Loan application form
- Bank account statement
- Two passport size photographs
- Passbook statement for last six months
- Liability statement
- Personal assets
- Property documents
- Salary certificate
- Signature verification
- Form 16
- Income tax returns
- Advance income tax payment
- Proof of business
- Employment proof
- Salary slips
List of property documents for a home loans
- Allotment letter from the private builder
- Deed of sale agreement
- Receipt of advance payment received for the taxes paid for land and property
- Receipt of land tax payment
- Approved building plan
- No objection certificate
- Copy of relative order
- Permission letter from the authority
- Detailed construction cost
- Land cost purchase declaration
- Power of attorney
- Post closure of loan
Importance of documentation
Documentation is a very important process especially when it is about a loan. A home loan is a very high-value loan where the loan provider makes sure that the borrower offers all kinds of documents so that the financial institution can run a complete background check about the individual, personal information, financial details, and every minor detail about the property. With the help of documents, all kinds of information and facts can be derived about the borrower so that the loan provider can make the right decision after verification and validating all the available information.
Home loans will not be able to be processed unless the entire documentation process is conducted by the borrower. Some various legal procedures and processes need to be done with the help of validation of all the property deeds and documents offered by the borrower. Unless validation is done for the individual as well as the property, a loan provider will never process or approve a home loans.
Other home loan eligibility criteria
- A good credit score is one of the most essential factors that need to be maintained along with proper documentation. A home loan is a high-value loan therefore the risk involved is very high. Therefore, financial institutions and banks will need a high credit score requirement from the home loans owner to approve the home loans. A good credit score makes an individual eligible to get a loan by proving their creditworthiness and past credit history. Similarly, if an individual does not have a good credit score he or she will not get the home loan approval.
- High income is very important to get a home loan approval and an affordable interest rate. High income makes an individual suitable to take home loans as he or she will be able to manage the monthly installments along with the fixed obligations and daily expenses. If an individual has insufficient income, it will be a burden for him or her to manage the monthly home loan installment that will be a pretty high amount. Without a high income, a loan approval seems to be next to impossible.
- The debt to income ratio should be minimal at the time of taking a home loan. If an individual is already having existing loans, a loan provider will never grant home loans to that individual. A home loan means a good amount of financial commitment that needs to be done every month because the home loan installment amount will be much higher than a personal loan or car loan. Therefore, it is recommended to close all multiple or existing loans that you have before you apply for a home loan.
Wrapping up
A home loans is undoubtedly the best way to get a huge sum of money to purchase land or property. Since a home loans is a long-term loan and a very high-value kind of loan, an individual must opt for an affordable home loan interest rate so that the monthly installments are affordable and do not become a burden to repay within the loan tenure.
