We are aware of the fact that availing a home loan is a lengthy procedure. However simple it might look in the bank’s advertisement, the fact remains that there are a lot of hiccups and hassles in the entire process. There are just so many obstacles to tackle!
Here, we look at the five most common problems faced by home loan borrowers in our country, by taking loans from state, national and international banks and banking institutions.
This article gives you information on the hassles of getting and obtaining a home loan and solutions as to look into so as to availing of a home loan becomes a hassle-free experience.
So, here we listed are some problems faced while availing a home loan:-
You might be rejected at the first stage
This seems odd and rather scary. But yes. There are so many home loan applications that do not pass even the first test! They are out rightly rejected due to incompatibility between the borrower’s qualifications and lenders requirements. It could be the age criteria, income criteria, proper documents not being submitted, the bank not being able to verify their details properly, not passing the field investigations conducted by the bank and many more. Click here to read about Important steps you should follow when your home loans is rejected.
The best way to avoid being rejected in this way is to check the eligibility requirements of lending banks carefully and apply only to that bank which matches your profile. Keeping proper documents ready and providing accurate, verifiable details to the banks will ensure that one sails through the preliminary verification process.
If the processing fee is not refunded
With every application form for home loans, banks require about 0.25% to 1% of the loan amount to be submitted as the processing fees. This processing fees is generally NON REFUNDABLE. In simple words, if the bank finds that you don’t deserve the home loan, these fees won’t be returned. This is the cost of applying for home loans.
If in any case, the bank states that they will refund the processing fees in case when they doesn’t sanction the home loan; it is better to get any such declaration in writing and make sure that the clause is enforceable. A verbal statement by bank authorities won’t be of any use, unless it is properly and legally documented.
If the desired loan is not sanctioned
The loan amount sanctioned is based mostly on repayment capacity of the borrower. Many things come into picture, when the bank decides how much loan a person can get. The monthly income, financial history, other unpaid loans, past repayment record, credit card usage history if any, bounced cheques, average balance with the banks, continuity in present employment, total years in employment, nature of employment and so on. These factors help the bank to decide whether it will be able to recover its money or not.
If one gets rejected due to any such criteria, they can increase their eligibility by clubbing together their spouse’s, father’s, son’s, relative’s income and make them a co-borrower. In addition to it, if one has sufficient funds in NSC’s, provident funds, LIC policies and such thingy, they can keep them as collateral and ask the bank to finance their home loan.
The interest rate dilemma
Whether to go for a fixed rate or floating rate interest for home loans is a dilemma which almost every home loan borrower faces. Even after deciding on a particular loan regime, the home loan terms and condition fine prints can create mess with your interest rates. For example even if a borrower has opted for fixed home loan rate and the bank has promised him. But in the fine print which authorizes the bank to vary this fixed rate every 2 years; things can go worse for the fixed rate borrower. Similarly if the bank doesn’t pass one the benefit of lowered interest rates in floating interest rate regime, it will be of a little value. Click here to read about Should i fix my home loans.
Avoiding such a situation essentially means that you have to study the terms and conditions of home loan carefully and clearly ask the bank about such things. In case of floating interest rates the facts can be verified by checking how the interest rates on home loan dropped during low interest periods. It is best to ask the bank for some historic floating rate changes.
Difference in property value
The bank has its own experts for legal, technical and financial appraisal of the property. They evaluate the property on its own established factors and give a value to it. This value can be considerably lower than the price you quoted for the property. Thus, the bank will only loan you up to the amount it valued. This can cause a substantial gap between what you need and what the bank is willing to loan.
To avoid this situation the borrower can get the property valued before applying for home loan from a bank approved valuator.
We know that the above mentioned problems are very common, but can be easily avoided if the borrower follows proper procedure, prepares sufficiently before applying and takes care of correct documentation.
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