Feel at home at the loan expo

Banks often have loan expos and melas for home loan seekers. Usually at such events, they will waive the processing charges and some will even offer a lower interest rate to people who book homes and apply for loans during at the venue. Some banks have put home loan issuances on fast track and are approving loans in 5-6 hours for small-ticket customers, who have documents in place.

While the melas offer great deals, you need to ensure that your home loan gets processed at the earliest so that you don’t lose out on the offers, some of which are applicable only to people whose papers get approved or processed during the mela period. Here’s a guide on what to keep tabs on when you approach the bank. These preparations may save you some running around and help you fasten your loan processing:

Home loan amount
Let us say your income is Rs 50,000 per month (Rs 6 lakh per annum) and you are paying a rent of Rs 10,000 per month for the flat you live in. Other than this, your monthly expenses are at around Rs 20,000. So that leaves Rs 20,000 that can be used to service the home loan.

The EMI on a 20-year home loan of Rs 1 lakh that charges 9.25% comes to Rs 916. Given this, at your income level, you are likely to be given a loan of around Rs 21.8 lakh. The loan amount is arrived at by dividing the monthly amount that can be used to service the home loan EMI (Rs 20,000 in this case) by the EMI for Rs 1 lakh (Rs 916). The ratio thus arrived at is multiplied by Rs 1 lakh to get the home loan amount.

In practice however, it is difficult for the institution to figure out expenses of each and every individual who comes to them for a loan. So, based on household expenditure data and their own their past experience, they assume a certain proportion of income which can be used to service the loan. On the basis of that, they decide on the loan amount. This proportion goes up as the income goes up.

Area of residence
Some banks believe that people residing in certain areas are more likely to repay the loan on time. If, in the past, many people residing in your area have defaulted on their loan with the same bank, then it may be difficult for you to get a loan. In case the loan is granted, then the bank would charge a higher interest rate to manage that risk it is taking. “We take precautions if we notice that a set of people belonging to the same geography have a tendency to default. It may be in terms of 100-150 basis points (1-1.5%) higher interest rate,” a banker told DNA.

Dues and other loans
Banks want to make sure you don’t have too many loans to repay. The chances of a person defaulting on a loan go up if there are too may expenses — including equated monthly installments (EMIs). Higher number of loans having a term of more than a year may be used by banks to reduce the loan amount or reject the application because such loans, including credit card dues, are also a part of your expenses. Banks know about your debts because Cibil maintains a database they have access to, and can provide input to. A report pulled out from this database contains details on all your dues, including whether they are being serviced regularly.

The paper-work
Before you head for the loan mela, you will need to carry along proofs of your identity, income and the home papers. For identity, you could provide copies of your driving license, permanent account number card, passport or a voter’s ID card. The income may be indicated via bank account statements, income-tax returns and salary slips, while a set of property papers too would be needed.  From the builder, you would need a title certificate or a development agreement and a commencement certificate, which is provided by regulatory authorities permitting a builder to start work on a particular plot.
Partnership deeds or third-party agreements would be needed depending on the type of property that is being developed by the builder. If you are about to take a loan for a ready flat, then occupancy certificate may be needed.
Check with the bank whether it has financed someone else residing in the project you plan to buy your home in. That’s because a bank that has sanctioned a loan for someone else in the project would have already done its technical and physical checks of the project. This could save you approval time.

Whether the bank is receptive to your application depends on a host of factors, such as your income, the source of income, salary structure and age.