It takes time and proper guidance to understand the complete process of home loan. The application and sanctioning of a home loan is not a one-step process. It is a lengthy process and takes time to get the sanction letter. The complete home loan application and sanction process has to go through various stages and involves formal procedures for approval.
The process of getting a home loan can be a tedious process if you have never taken a home loan before. Any kind of ignorance of minor facts can drive you into trouble and, in turn, can cost you a lot.
Hence, it becomes very important to understand the entire process, know the parameters and various filters that are being used by the banks /nbfc’s, if you want your loan to be sanctioned.
The critical stage in appraising the home loan application is the legal and technical verification of the property on which you want to borrow a loan.
We had a detailed discussion with Mr. Somvendra, Mudrahome about the importance of legal and technical verification process.
What is Legal and Technical Verification?
The valuation and validation of properties from legal and technical aspect is an important part of the checks and inspection done during the home loan process by every lender. A considerable amount of the home loan depends on the legal and technical valuation of the property done by the Banks/NBFC’s through the legal authorities.
Banks/NBFC’s and financial institutions has to verify the property against which the loan is applied to justify the loan amount and the risk to be taken by the lender. Lenders also has to do the verification of the property for which you want to take the loan. Home loan being a secured loan, in which the property is kept as security or collateral with the Bank/NBFC. This is the reason why the lender ask you to submit the original property documents (like Title Deeds, No Objection Certificates of authorities and other ownership papers) with them. These ownership documents remain in the custody of the lender until the loan is fully repaid.
During the credit assessment, these documents are used for legal verifications by the Banks/NBFC’s and other financial institutions. This means that the documents submitted by the borrower are used to verify that the property has a clear title and that the home loan amount is being disbursed to the right owner of the property for legal and valid reasons. Lenders do not fund disputed properties or the properties that do not have clear ownership documents. Hence, it becomes important for the borrowers to seek an expert advice if there is any missing title chain document before you approach any lender regarding home loan application.
Apart from many other checks Banks/NBFC’s also conduct the legal and technical evaluation of the property. Many lenders have a list of approved and unapproved projects that makes the process quite easier as if you are planning to buy a flat in the approved project of the bank there will be no legal and technical valuation of property. This happens because the lender has already evaluated and judged the legal and technical features of the project as a whole. Buying a property in an approved project by the Bank /NBFC and other financial institutions saves quite a lot of the time on credit evaluation.
However, in the case of top-up, resale or balance transfer of home loans, technical valuation of the property becomes very important to estimate the current market value of the property. The level of construction, maintenance, the built up and super built up area, age of property, level of construction and quality of construction require legal clearances. Also the local surroundings and special comments by the local residents are few other points that lenders need to move ahead for home loan application evaluation, other than the market value of the property. There is a fixed percentage that every lender funds depending on the market value of the property.
The solitary motive behind these legal verification and technical verification, is to fortify that the property is free from any kind of encumbrances and has a clear title, technically sound and meets the valuation benchmarks of the lender.
Quick points for technical and legal verification
• A separate fee for legal and technical verification is never asked by any Bank/Nbfc or any other financial institution, because the cost of these processes are included in the processing fee which is asked by the lender before the home loan appraisal process begins.
• It is important to read the home loan agreement carefully to know more about these valuation charges and any other charges that you may come to know as a surprise in future.
• You should not feel irritated by these valuation processes as these are the part of your home loan process. These verifications are conducted by the experts of their respective fields.
• Infact, you will be sure if the property which you are buying is legally and technically sound.