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Credit Appraisal It is the process of appraising the credit worthiness of a loan applicant.

Factors like age, income, number of dependents, nature of employent, continuity of employment, repayemnt capacity, previous loans, credit cards, etc. are taken into account while apprasing the credit worthiness of a person. Every bank or lending instution has its own panel of officials for this purpose.

Home Loan Procedure
With the increasing competition in the market for offering Home Loans, the otherwise tedious process of availing loans has gone a tremendous change in the recent years. However, there is still some process involved in the procurement of Home loan. It is advisable for you to first look at the different stages re uired for obtaining a Home Loan. !he followings are the step by step procedure of getting home loan"

Step1:Applicationform !he first step involved in applying for home loan is the procurement of application form from the HF# of your choice. !he $erforma of application every HF# %Housing Finance #ompanies& is different from the other but about '() information re uired to be furnished is the same. *long with the application form necessary documents like address proof, age proof, proof of income, bank balance etc. are also to be attached with the application form before it is submitted to the HF#. *long with all these documents HF#s also ask for processing fee of the home loan that varies (.+,) to (.,() of the total loan amount. Step 2 : Personal Discussion *fter successfully filling the application form and submitting it to the authority the ne-t step is face to face with bank or HF# where you have applied for the home loan. !he bank first evaluates the papers submitted and summons the applicant for the personal discussion regarding the home loan applied for. It is advisable that you carry all your original documents of whose copy you have submitted along with the application. Step 3 : Bank's Field Investi ation !he ne-t step is the field investigation done by the HF# or banks. !hey sent their representatives to the e-isting residence of the applicants or their offices for the validation of the documents submitted. !his is the essential part for the banks to establish the trust with the applicants. Step ! : Credit appraisal "# t$e "ank and loan sanction !his is the make or break stage of the process. !he bank or HF# will establishes repayment capacity based on your income, age, ualifications, e-perience, employer, nature of business etc. to access your credential. !he bank can refuse your loan application is any discrepancy is found at this stage. .ut if every thing goes according to the conditions negotiated by both the parties then the bank or HF# sanction the loan that may be unconditional or with some conditions levied. Step % : &ffer 'etter *fter the sanction of the Home Loan, the applicant gets offer letter from the bank or HF# with the following details"

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Loan amount /ate of Interest

!he final loan amount sanctioned by the bank is according to the loan9tovalue %L!:& norms. Step ( : Su"mission of le al documents ) le al c$eck !he bank or the HF# now asks for the legal documents of the property involved for applying home loan. !he mode of payment varies from full to part payment. '+.ank or HE#.t e-ceed the cost or value of the property.anks or HF# then go about the technical valuation of the property. instalment9to9income ratio %II/& norms and the fi-ed obligation to income ratio %F0I/& norms laid down by the bank.anks also use this ratio to calculate the loan amount that a person is eligible for on the total cost of the property . nature of business %if selfemployed &. !his percentage denotes a portion of the borrower. ualifications . !he documents remain with the bank until the repayment of the Home loan. 4ow. F&I/ * bank takes into account the instalments of all other loans previously availed of by the borrower. Step 0 : Si nin of a reements and su"mittin post1dated c$e2ues 4ow it is time of signing the final agreement of the home loan. !he appraisal is undertaken by a bank. For e-ample assume the II/ is fi-ed at 7( percent. * bank evaluates the repayment capacity of a borrower considering factors such as income. employer . !he e-perts of the bank visit the site that has to be purchased and value it as per the e-isting rules and regulations. Each bank has set its own parameters and standards for evaluating the credit worth of a potential borrower. : /e istration of propert# documents *fter the legal and technical valuation of the property the draft documents has to be cleared by the lawyer and stamping and registration of the documents is needed. -aluation c$eck !he . assets owned. Step * : +ec$nical . yet the loan amount can. 7( percent of the gross monthly income&. +(6(. *fter the signing of the agreement a bunch of $ost dated che ues are to be submitted as agreed on the agreement paper. if any If the terms and conditions are agreed the applicant has to sign the duplicate copy of the offer letter and that is to be submitted to the . !he eligibility for a loan that a person can avail of depends on his creditworthiness. the ma-imum loan eligibility is worked out.s monthly instalment on the home loan taken. !here is an upper limit on the ma-imum loan amount that a person is eligible for irrespective of the loan eligibility norms. age. !his ratio includes all the fi-ed obligations that the borrower is supposed to pay regularly on a monthly basis. !he percentage may vary from 88.history.88 to 7(. !he valuation of the property is the most important aspect that the bank considers before financing any property.o o o o o fi-ed or variable /0I !enure of the loan 1ode of repayment 2eneral terms and conditions of the loan 3pecial conditions. e-perience. !he ma-imum amount of loan is pegged to the cost or value of the property. if the gross income is /s 6 lakh per month. II/ !his ratio is used to calculate the loan eligibility of a borrower and is generally e-pressed as a percentage. including the home loan applied for. ta. Home loan" #redit appraisal to arrive at eligibility As$is$ 4upta5 6+ Bureau *ug '. additional sources of income. security of tenure. the borrower is eligible for a loan where the instalment does not e-ceed /s 7(.e. !he bank does all the legal checks on the property. !he ratio varies between <( and =( percent of the registered value of the property. Step 13 : Dis"ursement It is time for the final 5isbursement of the Home Loan. *fter the bank or HF# ensures financing the property is involves no risk they pay the final amount that is agreed upon.((( per month %i. Step .87am I3! *credit appraisal for a home loan is an important part of a loan eligibility evaluation process. !he loan eligibility according to the other parameters may be higher. according to the given II/ ratio. *ll the legal documents of the property involved have to be submitted.ased on the parameters of the bank. other loan obligations . investments etc. . In the case of under construction property the mode is part payment and in the case of ready possession properties disbarment is full and final. (7. !he fi-ed obligations do .

the lowest of these three parameters is the amount of loan that a borrower is eligible for. a borrower needs to be careful in planning his financing modes.88. For e-ample.88 to 7( percent as the ratio. determined in terms of the norms and standards of the bank. !he credit worthiness. the F0I/ is 8+ percent. would be /s 8(.ased on these parameters.((( 9 all loan instalments divided by the monthly income.s F0I/ standard.((( and a personal loan instalment of /s +. #redit appraisal determines your loan eligibility *credit appraisal is an important part of determining the eligibility for a home loan.((( per month as the housing loan repayment capacity.88 to 7( percent of his .and deductions for investments such as insurance . the information collected is on these aspects: 9 Incomes of the applicant and co9applicant 9 *ge of applicants 9 >ualifications 9 Family details 9 4ature of profession 9 E-perience 9 Employer 9 3ecurity of tenure 9 !a. a person can pay an instalment up to 88.((( per month.eing a crucial step in the loan process. It is generally e-pressed as a percentage. !his percentage denotes a portion of the monthly instalment on the home loan taken. .history 9 *ssets owned and their financing patterns 9 *dditional sources of income 9 $ast loan record. Each has certain norms within which a prospective borrower needs to fit to be eligible for the loan. !his helps in finding the loan eligibility of the applicant. Broadly. professional ta. *s he is already paying /s 6+.((( left.((( per month.((( per month. assume a borrower has an income of /s 6 lakh per month. and the loan will be calculated taking /s 6'. It is assumed that in normal circumstances. 2enerally.((( towards the car and personal loans. *ccordingly. and a proposed housing loan instalment of /s +(. as per the bank. and the uantum of the loan. he has /s 6'. * prospective borrower has to go thorough the various stages of the credit appraisal process of the bank. !he eligibility for the loan that a person can get depends on his credit worthiness. . assures the repayment capacity of the borrower 9 whether the borrower is capable of repaying the loan and dues on time.not include statutory deductions from salary such as $rovident Fund. the ma-imum amount eligible is worked out. Some methods of arriving at loan amount: Instalment1toincome ratio * bank applies the instalment9to9income ratio %II/&. if any 9 /ecurring liabilities 9 Investments 9 0ther present and e-pected liabilities !he norms differ from bank to bank. basically. ?sually. the banks fi. If he has a car loan instalment of /s 6(. 3o the total instalments the person can pay. Each bank has its own criteria to satisfy itself on the credit worthiness of the borrower. the housing loan amount is reduced. the eligibility is /s 8+. !he bank may have a standard 8( percent of F0I/.

E-perience.((( left and the loan eligibility is taken as /s <((( per month as the basis of housing loan repayment capacity of the customer. #redit appraisals for loan application As$is$ 4upta5 +88 5ec +8. 0ther loan obligations. !he ma-imum amount of loan eligible is pegged to the cost or value of the property. assume the income is /s 8(.((( per month. !he bank A HF# may have a standard of 8( percent of F0I/. including the home loan applied for. a backward calculation of the repayment capacity is made to find out the amount to be given as loan.((( pm for car and fridge. the F0I/ is . !he loan eligibility as per the other parameters may be higher but the loan amount cannot e-ceed the cost A value of the property. *ccording to the II/ ratio.anks A HF#s employ various stringent financial and non9financial tools and techni ues to evaluate the credit worthiness of the customer..(((. 'oan1to1cost ratio * bank also computes eligibility on the basis of a loan9to9cost ratio %L#/&. 4ature of business %if selfemployed&.( percent of the monthly income. the applicant is eligible for a loan where the instalment does not e-ceed /s 6(. %!he ratio varies between <( to =( percent of the registered value of the property & F&I/: !his stands for Fi-ed 0bligation to Income /atio. .s F0I/ standard would be /s 6. the . >ualifications. the repayment capacity of the customer is established.. 3o.000 pm $roposed housing loan instalment: Rs %5. !here is a upper limit on the ma-imum loan amount that a person is eligible for for the purpose of housing irrespective of the loan eligibility. the ma-imum loan eligibility is worked out. and the proposed housing loan instalment is /s 6(.(.. do not include statutory deductions from the salary like $rovident Fund.anks also calculated the eligibility based on the fi-ed obligation to income ratio %F0I/&. Each bank A Housing Finance #ompany %HF#& has its own norms and standards to evaluate the credit worthiness of the customer to be eligible for loan application.(((. In this case.. !a-ation history. a !: loan instalment of /s 6.. !he Fi-ed 0bligations however. For e-ample.and deductions for investments such as insurance or a recurring deposit. he has /s <.((( per month. the lowest of these is taken as the loan amount that the applicant is eligible for. L#/ stands for the Loan to #ost ratio. 3ecurity of tenure.((( towards the car and !: loans.((( left and the loan would be calculated taking /s . *ssets owned. Here. !hus. there is a car loan instalment of /s 7. %all loan instalments divided by the monthly income&. Fi7ed o"li ation to income ratio . the total instalments the person can pay. !he final loan amount sanctioned by the bank is as per the L!: norms. (@. For example: Income -Rs 50. 5uring this whole process. !he ratio varies between <( to =( percent of the registered value of the property. *lternative Aadditional sources of income. as per the bank. $rofessional !a. 0ther present and future liabilities.( percent i.ank A HF# takes into account the installments of all other loans previously availed of by the customer. For e-ample" *ssume the II/ is 88. In F0I/ calculation.and deductions for investment like :oluntary $rovident Fund.88 percent and the gross income is /s 8(. he has /s . /s +. !he fi-ed obligations do not include statutory deductions from the salary such as $rovident Fund.000 pm Fridge loan instalment: Rs #. including the home loan applied for. professional ta.( percent 9 . !his ratio includes all the fi-ed obligations that a borrower is supposed to meet regularly on a monthly basis.. *s he is already paying /s .e. *ge. the F0I/ is . Investments.(((. !he ma-imum amount of loan eligible is pegged to the cost A value of the property.t e-ceed the cost or value of the property. +((<. .ank AHF#.ased on these parameters.((( per month as the housing loan repayment capacity of the customer.000 p m !ar loan instalment: Rs ". While the loan eligibility as per the other parameters may be higher. In other words. Loan eligibility is computed on the basis of these parameters that act as a guide to determine the loan amount.000 pm *ccordingly. the loan amount can. Insurance $remiums.(((. this ratio includes all the fi-ed obligations that the customer is supposed to pay regularly on a monthly basis. *s the borrower is already paying /s 6(. !he bank may have a standard of 7( percent of F0I/.anks A HF#s use these ratios to calculate the loan amount that a person is eligible for on the total cost of the property.((( per month. mainly based on Income.((( per month. Employer. II/ norms and the F0I/ norms as laid down by the .salary. !his sets the upper limit or the ma-imum loan amount that a person is eligible for irrespective of the loan eligibility under other criteria. 2enerally. '+.((( per month. /ecurring deposits etc. . *ccordingly the housing loan amount will get reduced. *ccordingly. 'C/: L!: stands for the Loan to :alue ratio. the total installments the person can pay as per the bank. a bank takes into account the instalments of all other loans already availed of by the applicant and still due. !his ratio is used to calculate the loan amount that an applicant is eligible for on the basis of the total cost of the property.am I3! In order to get a housing loan the customer has to go through a credit appraisal process. .s F0I/ standard is /s 6+.

!his percentage denotes the portion of the customer.per month *s per the II/ ratio. For &xample: IIR is '0( )ross Income is Rs *0. *s a rule of thumb.000+.II/: !his stands for Instalment to Income /atio. It is generally e-pressed as a percentage.(((A9per month %7() multiplied by 2ross 1onthly Income& . the banks use 88.!his is used to calculate the loan eligibility of the customer. +7.88 ) to 7( ) ratio. the customer is eligible for a loan where the instalment does not e-ceed /s.s monthly instalment on the Home Loan taken.