Bank approved property: What you should know


Bank approved property: What you should know


Bank approval is one of the factors that define the credibility of a residential project.

In a real estate market devoid of regulation, bank approval is one of the factors that can assure you the credibility of the project. Homebuyers can choose between loans from public or private sectors. Banks and Non-Banking Financial Corporations (NBFC) are few choices for buyers to avail a home loan.

NBFCs are financial institutions that offer banking services to customers. These institutions are restricted from taking deposits from the public depending on the jurisdiction. The operations of these institutions are regulated under the country's banking regulation.

The first step is to obtain necessary property documents from the developer to get the loan processed in a bank of your choice. Normally, most of the developers have their project pre-approved by several banks.

                 Here’s a list of the commonly asked questions:

From where can I get a list of the bank approved projects?

How do I know that any private or public sector bank approves the project?

How can I apply for a home loan? Kindly tell me the procedure?

How do I check whether the project is approved by the bank?

For NBFCs

You can avail a home loan of up to 500,00,000 (minimum loan amount Rs 1 lakh) but not exceeding 85 percent of the cost of property (including stamp duty and registration fees) or 80 percent of market value, whichever is lower. The loan amount can be further enhanced by including an earning co-applicant.

The actual loan amount is determined taking into various account factors such as Repayment Capacity, Age, Educational qualifications, Stability, and continuity of income, Number of dependents, Assets, Liabilities and saving habits.

home loan NBFC

Home loan: Making a choice

There are various types of home loans available and for different durations. Let's compare the home loans of public sector banks from private banks and NBFCs, since most of the terms and conditions remain same for all types of loans.

      
 
Factors                            

Private Banks                  

Public Banks                   

NBFCs     

Processing fees

This is charged to analyze, evaluate and paperwork for your loan. There are two methods of charging this fee – One, a lump sum amount based on the amount of loan and other, percentage of the total loan amount.

Such banks generally have low processing fees which starts from 0.25% or a fixed amount.

For loans upto Rs 30 lakh, Rs 5,000 + Document Charges + Taxes.

Loans within Rs 30-75 lakh, Rs 10,000 + Document Charges + Taxes.

Loans above Rs 75 lakh, Rs 20,000 + Document Charges + Taxes.

Interest rates fluctuation

Interest rates are increased by private banks as soon as RBI increases its REPO rate, but do not decrease with the same speed when the REPO rate is decreased, at least for existing customers.

The interest rate policies are more transparent. They keep the same policies for all loan customers and the decreased rate is effective for existing customers as well.

Is fixed by the Finance companies and varies accordingly.

Hidden charges

The service provided might be quick and convincing, but the consumers have to beware the hidden charges that these banks often impose later.

They are slow and steady with no hidden charges.

There are hidden charges here too, which a consumer needs to be careful about.

How do banks approve real estate projects?

- Banks demand certain legal checks before approving a project.

- The first is government authority approval. The bank checks whether the government approves the land acquired by the developer or not. The bank orders property title search, where a valuer submits the report that the acquired land is free from all charges. "The consumers before investing should ask for the property papers so that the bank can do the required title search which rectifies the authenticity of the developer," says Alok Kumar, Manager SIDBI bank.

- Environment clearance from Union Ministry of Environment and Forests.

- The acquired land should not be in litigation in the court.

- If the applicant approaches the bank for a project that the bank already has tied up with, then the task of approval becomes easier.

Home loan for SBI approved projects

Here is a list of requirements for your home loan approval.

Eligibility

The eligibility criterion for an individual to apply for a home loan are:

Minimum age: 18 years as on the date of sanction

Maximum age: 70 years. i.e. the age by which the loan should be fully repaid, subject to availability of sufficient, regular and continuous source of income for servicing the loan repayment.

home loan eligibility

Security required will be equitable mortgage of the property. Loan-to-value (LTV) ratio: The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always at the forefront of lending decisions, and the likelihood of a lender absorbing a loss increases as the amount of equity decreases. Therefore, as the LTV ratio of a loan increases, the qualification guidelines for certain mortgage programs become much more strict. Lenders can require borrowers of high LTV loans to buy mortgage insurance to protect the lender from the buyer default, which increases the costs of the mortgage.

For instance, if someone borrows 13,00,000 to purchase a house worth 150,0,000, the LTV ratio is 13,00,000 to 15,00,000 or 13,00,000 to 15,00,000, or 87 percent. The remaining 13 percent represent the lender's haircut, adding up to 100 percent and being covered from the borrower's equity. The higher the LTV ratio, the riskier the loan is for a lender.

Home Loan Amount

Margin (Min%)

LTV Ratio (%)

Up to Rs 20 lakh

10

90

Between Rs 20-75 lakh

20

80

Above Rs 75 lakh

25

75

home loan document checklist

Guarantor's documents
guarantor home loan documents


Additional documents

Additional home loan documents

Home loan processing charges

The processing fee structure (including service tax) is as under: The bank has some miscellaneous charges that a consumer has to pay as a part of the processing fee. The pre-sanction charges include advocate's fee for the property and the title investigation report and the valuer's fee for valuation report. Post sanctioned charges of home loan are stamp duty, property insurance premium and CERSAI Registration Fee of 250+ service tax up to Rs 5 lakh limit and 500+service tax for limits above 5 lakh.

Home Loan Amount

Processing Fee w.e.f. 01.04.2015

Upto Rs 25 lakh

0.25% of loan amount, minimum Rs 1000/-

Between Rs 25- 75 lakh

 

Rs 6,500/-

Above Rs 75 lakh

Rs 10,000/-

A loan is a product that the bank is selling to its customer i.e. you. As a customer, you should try to buy a product whose cost is as low as possible in both short and long term. So, make a wise decision.


Posted by Sukriti Yaduwanshi, Times Property, Nov 24, 2015

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