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Getting 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 in the entire process. Here are the 7
most common problems faced by home loan borrowers in India. Each problem is discussed in
detail and appropriate remedies are mentioned along with it. The objective of this article is to
ensure that your home loan becomes a hassle-free experience.
1. Rejection at the first stage

Strange but true, many of the home loan applications 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 your details properly, not passing the field investigations
conducted by the bank and many more. 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 you sail through the preliminary verification process.

2. Processing fee 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 NOT
REFUNDABLE. In simple words this means that for whatever reasons, if the bank finds that you
don't deserve the home loan, this fees won't be returned. This is the cost of applying for home
loans. If in any case, the bank you have applied to states that it will refund the processing fees in
case the bank doesn't sanction you 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. In all other cases there is little remedy
for processing fees being not refunded.

3. Desired loan 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 home loan a person can get. The monthly
income, financial history, other unpaid loans with the borrower, past repayment record, credit
card usage history if any, bounced checks, average balance with the banks, continuity in present
employment, total years in employment, nature of employment etc. These factors all clubbed
together help the bank to decide whether it will be able to recover its money satisfactorily or not.
If you get rejected due to any such criteria, you can increase your eligibility by clubbing together
your spouse's, father's, son's, relative's income and make them a co-borrower. In addition to it, if
you have sufficient funds in NSC's, provident funds, LIC policies etc. you can keep them as
collateral and ask the bank to finance your home loan.

4. 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 havoc with your interest rates. For example even if a
borrower has opted for fixed rate home loan and the bank has promised him a rate which he feels
is good, the catch is in the fine prints 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 you the
benefit of lowered interest rates in floating interest rate regime, it will be of a little value.
Avoiding such a situation essentially means that you 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. Ask your bank for some historic floating rate changes.

5. Difference in property valuation

The bank has its own experts for legal, technical and financial appraisal of the property in
question. It evaluates the property on its own established parameters and assigns a value to it.
This value can be significantly lower than the price you quoted for the property. Thus the bank
will only lend you up to the amount it valued. This can cause a significant gap between what you
need and what the bank is willing to lend. To avoid this situation the borrower can get the
property valued before applying for home loan from a bank approved valuator.

6. The down payment

Banks require the borrower to fund at least 10% to 20% (varying from bank to bank) of the entire
loan amount as the down payment for the home loan. This amount has to be deposited before the
disbursal of the home loan. In the absence of such down payment the bank will refuse home loan
to the borrower. For a home loan of 10 lacs this could mean anything between 1 to 2 lacs. This
amount must be readily available with the borrower. In a scenario where the valuation of the

property by bank is considerably lower than the market price of the property, the balance will
also have to be paid by the borrower. This effectively increases the down payment. The obvious
remedy to this tricky situation is to get the property valued beforehand and have the down
payment ready. Some banks also allow NSC's, provident funds, LIC policies etc for down
payment. It is generally a good procedure to check the down payment requirement of various
banks and choose the one which requires the lowest amount to be deposited initially or fits your
budget well.

7. Title deeds and NOC Documentation Problems

The title deeds and NOC documents have to be furnished in the bank's format. Borrowers who
don't provide such documents in proper format, will ruin the entire exercise and won't get any
home loan. To avoid falling into such uncomfortable situation, enquire about all the documents
required by banks beforehand and take necessary steps to get them ready within the stipulated
time frame.

Buying a home is one of the major decisions a person has to take during his life. It is rare to find
someone who pays the entire cost of home at one go. A home loan is an essential part of any
home buying endeavor. Taking a home loan is a long journey, which involves many stages. The
key to getting your home loan in a smooth way is being familiar with the entire home loan

Beginning the home loan process in India

The process of getting a home loan starts with a formal application for the loan. The application
form requires certain basic information about you. This will include your personal, residential,
income, employment, educational details, details about the property, estimated costs and current
means of financing the property. Though the requirements may vary from bank to bank but there
certain thing which every bank will ask.
The application form must be supported with valid documents to substantiate the facts. Generally
the banks will ask you to submit following documents.

Income proof

Age proof

Identity proof

Address proof

Employment details

Proof of educational qualifications

Details about the property if finalized

Bank statements

The purpose of the entire exercise is to ascertain the suitability of a applicant for a home loan.
The income documents and bank statements provide vital clues to the bank regarding your
financial health.
Processing fees for home loans in India
An important thing to note about home loans is the processing fee. Banks charge a processing fee
for every home loan application. This fees is non refundable. The processing fees varies from
bank to bank and is generally between 0.25% to 0.50% of the loan amount. This fees is used by
the bank to start and maintain the home loan process including completing the various
formalities during the entire period.


The above mentioned problems are very common, but can be easily avoided if the borrower
follows proper procedure, prepares adequately before applying and takes care of correct

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