Home loans involve big-ticket sizes. The loan money runs into lakhs, sometimes even Crores. Thus, lenders are extra cautious while deciding whether to grant a loan to a home loan applicant or not. The home loan verification process allows banks and commercial lenders to judge a loan applicant's repayment capacity and the risk involved for the lender in doing business with the loan applicant. Thus, it is an integral and essential part of the home loan process.
After you have submitted your loan application, your lender will go through the information provided by you and based on that, they will decide on your application. If they find you creditworthy, they will approve your application and request you for different documents, such as KYC documents, income and address-proof documents, etc. Once you have submitted all the documents, your lender will hire a legal expert to go through these documents and verify their authenticity. At this point, your lender will also approach a credit information agency to enquire about your credit score. An individual's credit score plays a key role in the home loan verification process and their chances of getting approved for a loan. A high credit score indicates high repayment capacity and low risk for the lenders. A high credit score, therefore, makes getting approved for a home loan quite easy. A low credit score, on the contrary, can make it impossible for a borrower to get approved for a loan, even if all the information provided by the loan applicant is correct.
After your lender's legal team has verified all the information provided by you, you will be extended a loan offer by your lender in the form of a loan sanction letter. If you agree with the terms and conditions mentioned in the loan offer letter, sign a copy of the sanction letter and send it back to your lender.
After your lender receives the signed loan sanction letter, they will move to round 2 of the home loan verification process. During this step of the home loan verification process, they will hire legal and technical experts to perform a physical and legal check on the property you plan to buy. The key intention is to make sure that the money is not going into a property embroiled in a legal conflict or a property that does not meet the construction guidelines. This step of the home loan verification process ensures the safety of the borrower's money as well as that of the lender. Once you pass these two stages of the home loan verification process, your lender will approve your loan application, extend you a final home loan offer and release the loan money into your account.
Once you have the money in your account, you can complete your property purchase. This is also when one's home loan EMI obligation starts. Once you have the loan money in your account, you will have to start paying your EMIs. During the beginning years of your loan tenor, the interest component of the home loan in your EMIs will be much higher than the principal component. However, as time advances and once your lender has recovered the majority component of the total interest, the major portion of your EMIs will start going towards the recovery of the principal component. Please keep in mind that not paying one's loan EMIs for an extended period can lead to serious repercussions. Hence, one must never miss paying their EMIs and one of the easiest ways to do this is to borrow what one's income and pocket permits one to repay easily and without feeling burdened.
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