Home Loan – The fine art of lending / It all begins with Homes / Dream Homes / Healthy and Safe Homes

A loan advanced to a person to assist in buying a house or flat is Home Loan.

A sum of money borrowed from a financial institution or bank / NBFC to purchase a house. Home loans consist of an adjustable or fixed interest rate, repayment period and payment terms.

When a person applies for a home loan, some of the typical things they have in mind are whether they should go for a fixed interest rate or a floating interest rate, what’s the ideal repayment period, the terms and conditions they would be comfortable with, prepayment clause, etc. However, seldom does one think about the entire concept of a “home loan” from the lender’s perspective. What does your bank think about when looking at your loan application?

In Their Shoes: Home Loans from a Lender’s Perspective:

HDFC, LIC Housing Finance, PNB Housing Finance, Diwan Housing, ICICI Bank, SBI, India Bulls, etc. the leading lenders in India, consider some of these following points before giving out home loans:

  • In their own words, the first and foremost criterion is whether the Customer is Genuine or not; that is why they ask for the KYC, all identity proofs and legal documents to make sure that Mr.X is actually Mr.X and not Mr.Y and also to check his banking / credit history.
  • Assessment of Repayment capability of the borrower: For this, the lenders check what percentage (50% – 70%) of Yearly income of an applicant should be considered for EMI calculation of the loan amount to be granted. This is for ascertaining the amount of loan applicability as also his repayment capacity. Last few years income proof is also needed to be submitted.
  • Banking / Credit Track: ICICI along with other banks bank examine the nature of banking and the banking habit of the borrower. The borrower may otherwise be very well off but there can be chronic cheque bounces from his/her end or maybe unable to manage money etc. This is a very important criterion for providing home loan.
  • Checking the legal & technical prospect of the property to safeguard the home buyer:
    Title: ICICI bank and all other banks and institutions carefully check whether the property in question clearly stands in the name of the borrower and the property is free from any encumbrances. They also carefully scrutinise the entire history of the title of the concerned property from legal point of view.
    Technical aspects: The technical aspects of the property are very carefully checked. Such as whether the flat or building is constructed in strict accordance to the sanctioned plan. Let us explain with a simple example. Say the builder took permission from the government /Municipal Corporation to build G+ 4, but instead he builds G+6. In this case, the building becomes illegal and the banks will not provide home loan for this particular property to safeguard the buyer from illegal transaction and undue harassment.
  • While granting a home loan, lenders generally ask the applicants to submit a copy of their bank’s account statement, for six months to a few years. These are very important documents from the lender’s perspective, for determining the applicant’s home loan eligibility. Here’s what the lenders look for, in a bank account statement:
    • The existence of any loan being serviced
    • The level and nature of activity
    • Inward and outward cheque returns
    • Account balance and nature of debits
  • Finally, the clauses of the loan agreement are extremely important for the lender. When submitting a loan application, the borrower needs to agree to the clauses of the loan. The lender disburses the loan only when they are satisfied with the warranties of the borrower. This gives the lender the right to impose penalties on the borrower if any clause is dishonoured during the loan tenure.

Home Loan & Home Inspection must go hand in hand

Home is one of the biggest investments one make in his/her lifetime. And to make this dream come true, we have numerous banks giving out Home Loans. With the home loan, one either buys a home or an apartment or builds a home etc. So their dreams are fulfilled…for the time being.

Reality hits when after moving in, the truth behind their four walls comes infront of their eyes. No matter how unfortunate it may seem but they are bombarded with unexpected situations. Situations which may have arose as Home Inspection was not carried out. Their dream home turns into nightmare with damp / seepage issues (For more on Moisture / Damp / Seepage issues refer to the link – www.macj-abuyerschoice.com/real-estate/moisture-damp-seepage-invisible-silent-killer-unsuspecting-criminal/) ruining their favourite wallpaper or paint flaking off or something or the other. Now the damp in their walls have dampened their spirits. There could be other issues , Rust, Termites, inferior materials / brick work / improper RCC structure causing cracks, sub-standard wall plastering, inferior flooring causing cracks / black spots, tiles with mismatches and found to be broken and cracked at several places, electrification of inferior quality causing short circuiting / damaging the wiring, conduits and other electric appliances making life of the occupants risky, no proper drainage for the outflow of water causing seepage/leakage in the ceiling, poor internal installations of units e.g, water, light, gas, power, sewerage, doors, windows, etc. A person has put in so much hard work in acquiring a loan, then building a home or buying it and now he/she doesn’t deserve to face this.

If these issues are taken care of at the time of unit completion / delivery by conducting a thorough home inspection / audit, it will help take corrective action today at a nominal cost / time and probably avoid unnecessary potential future damage and high costs. It will also help you talk to your seller to have the issues taken care of at that stage. It will in general increase the life of the home by many years and help you to know your home better.

In fact, home inspection will also serve as a guide to the seller to understand the issues and take corrective correction before selling. This will add to his credibility and saleability of the unit.

It will also help home loan lenders to assess the quality of the home and ensure that the same is healthy and safe.

Hence, home inspection will benefit all stakeholders (including seller / buyer / developers / realtors / lenders).

We at MACJ – A Buyers Choice Home Inspections are committed to keep your prized possession healthy & safe.

Conclusion

Getting a home loan today is much simpler than before. Loan providers are more flexible, but money is always lent with the intention of getting it back. That is why lenders carefully draw up loan agreements. They seek to ensure that they do not go into a loss-making agreement with a borrower. As a borrower, one must read the terms and the conditions of the loan beforehand. Ensure that they suit you, as only then will you be able to repay the loan in a proper way.

Last but not the least – know “How Healthy & Safe your Home is” – get a professional home inspection done. Understand, how healthy and perfect is your home, whether it is upto the mark in terms of all (damp, electrical, material type, masonry, plumbing, civil, door, window, etc.) conditions or not. Get a Pre-inspected home or get a Professional Home Inspection done on the home before / after taking the home loan. Get a complete healthy and safety check up of your home (new or existing). For more information on Professional Home Inspection visit www.macj-abuyerschoice.com. GET YOUR HOME INSPECTED!!!