Demystifying the Verification Process for Home Loans

Home loans include a hefty amount of money. The loan amount easily runs into lakhs, sometimes even crores. Since the loans normally involve such a substantial amount, lenders are extra cautious about checking the repayment capacity of a borrower before sanctioning a home loan. They verify all the information and documents provided to check and authenticate whether the loan applicant can be trusted with the timely repayment of the loan. Lenders do this not only to secure their money but also to safeguard borrowers against late fees and penalties for loan default. The verification process for home loans refers to the process of verifying all the information and documents provided by a loan application before sanctioning a loan.  

The home loan verification process involves two steps. When you apply for a loan, your lender will ask you to submit certain documents. Normally, lenders ask borrowers to attach address proof, KYC, income and property documents. Once you submit these documents, your lender's verification team will assess the authenticity of each of the documents provided by you. In simpler words, this team will check every document to ensure none of the documents are forged. Further, they will also do a background check to make sure all the information provided by you is correct. 

If you pass the document verification stage, you will move on to the next step, which is property verification. Lenders decide the loan amount to be sanctioned as well as the terms and conditions of the loan after checking the property to be pledged as collateral. Since home loans are a type of secured loan, the quality of the collateral is of utmost importance. So, properties located in central locations or gated societies built by highly-reputed builders and having all modern facilities have a higher resale value than standalone properties located in far-off locations or old homes or apartments in a shabby state. During the second stage of the home loan verification process, your lender will hire a team to go through all the property papers provided by you as well as physically assess the property to be pledged as collateral. Based on their assessment, the team lets the lender know whether the property pledged by the borrower is a high-quality collateral or a low-quality one and then, the lender decides whether or not to sanction the loan to the loan applicant and the terms and conditions on which to sanction the loan.

The verification process for home loans is an integral part of the home loan application process. Failing to pass this stage will lead to immediate loan application rejection. Please keep in mind that forging documents and falsifying information is a serious offense, one that leads to immediate loan application rejection and can completely ruin your chances of availing of a loan in the future. So, never lie in your home loan application.

Also, while we are on the topic of things one should not do when applying for a home loan, here are a few things one should refrain from doing when applying for a home loan: 

1. Do not apply for a home loan if your credit score is below 700. With such a credit score, getting approved for a home loan becomes difficult and if the loan approval comes, it comes with unfavorable loan terms and conditions. 

2. Never apply for a home loan amount higher than what you are eligible for. Doing so would portray you as credit-hungry and diminish your chances of availing of a loan on favourable terms and conditions. 

3. Lastly, do not opt for a high LTV ratio loan. Try to save as much down payment as possible. A low LTV ratio loan helps one avail of lower interest rates and is also easier to pay off.