To Buy House with Home Loan is quite tedious & exhaustive process. Buying a house itself is a major financial decision. Some people delay this decision as they would like to buy their first property from own funding. Best bet is to buy house with home loan. Reason being property prices keep increasing and secondly, during the later part of life financial commitments will increase. When i bought a house, i struggled to understand steps to buy house with home loan. After going through this cycle, now i am in a position to explain step by step process how to buy house with home loan.
Step 1: Before you decide to buy house with home loan, it is important to fix the budget and arrange atleast 20% funding from own sources. Reason being banks will only lend you 80% of property cost as Home Loan. You may check my post 8 Steps Financial Planning before you buy dream Home
Step 2: Check your CIBIL Score Online to avoid any future surprises. CIBIL Score of 750 or more is must to avail home loan in India.
Step 3: I strongly recommend to apply for pre approved home loan. Reason being it is critical to know loan eligibility before finalizing the property. Loan eligibility depends on multiple factors like salary, other liabilities, repayment capacity etc. In few cases, the buyer has to call off the deal as loan approved was much lower compared to property cost. Pre-Approved loan is valid for 3 months and can be extended to max 6 months. After receiving sanction letter, request the bank to provide list of property documents required for Home Loan Disbursement.
Step 4: After loan approval, you can search and finalize the property.
Step 5 (a): After finalizing property, You can sign the Sale Agreement (by paying 1% stamp duty on consideration value) & pay token money. Token money is normally between 2 Lac to 5 lac depending on cost of property.
Step 5 (b): At the time of signing sale agreement and handing over token money kindly check all property documents in original. Get xerox of all original documents from seller & match with the list of documents required by bank for loan disbursement.
Step 6: Submit all the property documents to your Bank for Loan disbursement
Step 7: Bank will get the documents verified and loan officer will visit the site for physical verification & valuation.
Step 8: Once the loan is approved for disbursement against property, you will be called to sign the Home Loan Agreement. Carry few blank cheque leaves with you and check with bank if any other documents required at the time of signing loan agreement.
Step 9: Now you are all set for registration & buy house with Home Loan. After consulting your lawyer and seller. Inform the bank in writing /through email the date of registration. Kindly keep the gap of 7-10 days between registration & date of signing home loan agreement. Inform the bank on Home Loan cheque denominations e.g. if your loan is 50 lacs and from this amount if you need to close 35 Lacs outstanding home loan of seller. In this case, inform your bank to give 2 cheques of 35 lacs and 15 Lacs.
Step 10: Insist that you need photocopy of home loan cheques 2-3 days before registration date as seller would like to see the cheques before registration. Banks have habit of delaying Home Loan Cheque therefore collect the photocopy of cheques in advance to ensure that cheques are ready.
Step 11: Kindly inform seller to vacate the house 2-3 days before date of registration. On the date of registration, visit the house and check if it vacant or not. House should be in same condition as agreed upon in sale agreement. Take all the keys from seller and put your lock on house.
Step 12: To buy house with home loan is not that easy. On date of registration, after taking possession you should visit your bank. Collect all cheques and then you need to visit the bank of seller (To close his home loan first). You will then march towards Registrar Office. One bank executive will accompany you through out the day and will keep collecting all original documents from you as & when you will get it. It is advisable to hire good property lawyer for registration as he will complete all the legal formalities. Don’t trust the lawyer of seller.
Step 13: Once the sale deed is signed, you will also get encumbrance certificate of same date. All these documents along with stamp duty receipts will be taken by bank executive. Before handing over all originals to bank executive take photocopy of all.
Step 14: Process is not completed yet. The seller’s bank will handover original documents (submitted by seller to his bank for Home Loan) after 2-3 weeks and it is your responsibility to handover these original documents to your bank. It is advisable to take letter of authorization from seller that you will be collecting the original document on his behalf from his home loan provider.
Step 15: Submit all original documents given by sellers Home Loan provider to your bank and take acknowledgement from your bank mentioning list of all documents submitted by you to your bank. Congratulations with this you have completed all the steps to buy house with home loan.
Through this post i tried to explain all the steps to buy house with home loan in simplistic manner. I can write separate articles on each of these points but objective of this post is just to outline broad steps to buy house with Home Loan. Hope you liked it.
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Thankyou so much sir, this steps are really nice to take home when you have taken home loans. Nice article.
Thanks for liking the post & sharing your feedback.
Hi Nitin,
I have finalized a property (a landed house) of area 26mtr or 280 sq feet. ICICI is saying they cannot give loan on property less than 400 sq feet, Please help and let me know which bank should i approach. This is a landed house that is 3 storey built.
Regards
Pankaj Kumar
To be eligible for Home Loan, property should be minimum 400 sq feet in size. I don’t think so any bank will approve Home Loan still you may check with co-operative banks, Tata Housing Finance or DHFL. They might consider.
Hi Nitin,
Thanks for your detailed article.
I have a case here where I am going to buy a flat from the seller who has not yet registered the flat and she also has loan of 25 Lakhs pending
to be cleared with DHFL.I have approached Axis Bank for a loan of 30 Lakhs.The Axis bank contact explained me the below process to have the flat registered
The buyer applies for a Bank loan in Axis Bank. The Bank prepares the DDs in the name of DHFL & balance in the sellers
name based on the docuemnts and the lawyer comes to the Sub Registrar office along with the DDs. Seller registers the flat in his name.
From there the seller goes to DHFL office and submit their DD to close the loan.
Once the original docuemnts are recieved from DHFL the remaining DD(amount of 5 Lakhs)is handed to the Seller.
Is the process right,can a flat be registered on someones name without closing the earlier with the sellers bank.Please advise
The process is not clear. As you mentioned that DD’s will be handed over @ time of registration in seller’s name. It is not mentioned when the flat will be registered in your name.
Seems Axis bank is complicating the process. As the property is not registered yet therefore you just need to sign 1 tri-party between you, seller and builder. it is called transfer agreement. After transfer in your name, builder will register the property directly in your name. You need to check the payment flow as in who will pay whom and how much amount.
Nitin but the seller already has a loan with DHFL and I am taking a loan from Axis bank,and Axis bank says that the Axis bank lawyer comes to the Sub Registrar office along with the DDs for DHFL and Seller registers the flat in my name and from there the seller goes to DHFL office and submit their DD to close her loan.
Once the original documents are recieved from DHFL by the Axis bank the remaining DD(amount of 5 Lakhs)is handed to the Seller.
Ok. If my understanding is correct builder will 1st register the property in the name seller and than seller will register it in your name. In this case process suggested by Axis Bank is correct.
What is the difference between EC (Encumbrance Certificate) and Mutation
Encumbrance certificate is issued by Sub-Registrar office & it certify that there are no dues and title is clear and marketable. It show all the transactions in respect of the said property. It contain records of last 13 years.
Mutation means entering your name in municipality records (Revenue Records) where you pay property tax for the said property. in short it is rectification in the records of the municipal authorities replacing the name of the old owners of a property with that of the new owner
Sir, Thank you so much. Your website is amazing and very informative.
Thanks for liking the site…Keep Reading !!!
Thank you for writing this. I am selling my home to a person who intends to take a home loan. We have registered a partial agreement to record the 20% payment and now the bank is asking for my original property agreement before disbursement. They have refused to give any acknowledgement of receipt of the document and they insist that they will give a cheque after the sale deed is done. This does not sound right to me because it seems to imply that ibshould have blind trust in the bank. Is this accepted practice?
Thanks.
I will not suggest. You may handover photocopy after receiving token money but handing over original documents before execution of sale deed is suicidal.
It is not a standard practice.
Hi Nitin, I wanted to clarify while accumulating 20% of the downpayment for housing loan, can we sell the jewelry and record in books as legal white money
You can do that. You can arrange your contribution from any of your existing assets. Bank may ask for source of fund which should be declared.
Hi Nithin, I found this blog very informative and your answers are really helping.
I have a question on homeloan.
Generally banks provide loans on 20:80 basis.. that is 20%own contribution and 80%bank loan. If in case I have paid 30%to builder.. And still want to avail 80%of loan from bank to disburse entire amount to builder and 10%back to me? Will banks disburse this way?..
Unfortunately it is not possible as bank will make disbursement only to the builder. Builder raise disbursement request to bank and bank will release payment. You may check with builder if builder agree to refund 10% to you and raise demand note against this payment. Personally i will not suggest this route until unless you are in urgent need of funds.
hi nithin, i purchased a property in bangalore. I did a early registration. corporation Bank has released full amount of my loan amount even if my full disbursement is after 5 months. Is full disbursement is mandatory to do sale deed. Builder got benefited by this, i have to pay full interest from now on.
Normally Full and Final Payment is due at the time of Property Registration i.e. execution of sale deed. You can defer the payment provided builder agree for same. It can be mentioned in the sale deed.
sir , token money should be paid to seller or it goes to government…and is it included in total value of home?
Token money is retained by the seller and is part of total consideration value.
thnk u sir….and sir when we pay token money to seller…is he provide us original documents or xerox …and which documents we have to submit to bank at the time of loan disbursement
Seller will provide photocopy of documents and for list of documents, you may check with bank.
sir thnk u fr ur precious reply…sir at the time when we pay token money to seller… is seller give us original documnets …and at time of loan disbursement we have to give original documents to bank or xerxo ….
As i mentioned, when you give token money you will receive xerox and at the time of registration you will receive original documents from seller which you need to submit to your bank if you have availed home loan else you can retain all original documents.
hi nitin,
Recently i have done one Agreement to sale for a resale property and paid the tokan money to seller. Please tell me for bank loan shall i have to submit the original ATS to bank or not .
Originals should be handed over at the time of registration.
Hello sir,
We are in process of buying a flat in Mumbai. As you have mentioned, we should pay 1% stamp duty and sign the sale agreement. In Mumbai, stamp duty is 5% so when should we be paying rest.
Thankyou Sir.
Sale Agreement should be on 0.1% stamp duty if you are availing Home Loan. If you are planning to register the sale agreement @ 1% stamp duty then balance stamp duty of 4% is due at the time of registration of sale deed.
Hello Nitin, Very Nice information. I am planning to buy a house for 70 lakh. Taking loan for 25 lakhs. Own funding of 45 lakhs. Now the seller has outstanding loan of 30 lakhs and he says that i should give him 30 lakhs from my own funding of 45 lakhs so that he can close the loan. But howcan i give such huge amount to the seller just on basis of agreement of sale or MOU? Can i give a DD to the sellers bank so that i am safe? I dont have trust to pay 30 lakhs 2 weeks before sale deed. Please guide me so that this situation is handled legally.
I will not suggest. Let bank loan be closed through your bank loan.
Hi Nitin, thanks for the information. I am going to buy a resale flat in Mumbai by taking home loan. As you might br aware, in Mumbai agreement for sale is registered and banks give home loan based on that. I wish to execute and register a sale deed too after full payment is done. In which case, can I do a sale deed even after bank has kept all prior original documents with itself? Secondly, will I need to pay the stamp duty and registration charges again?
1. You can execute sale deed after Home Loan is approved.
2. Any amount paid for registration of sale agreement will be adjusted against the total stamp duty and registration charges. You need to pay balance stamp duty at the time of execution of sale deed.
Hello Nitin, i have finalished a resale flat. And it is registered on the seller name and his wife name… Have applied for a home loan, during final settlement sellers want separate DD from bank. When i approached bank they say generally they provide only single DD and we need NOC from other owner. Is this the actual process..
Not exactly. You may ask for multiple DD’s provided all are in favor of a seller. Record all DD details in your sale deed.
Hi Nitin, I am buying a resale flat which has a home loan outstanding amount of 15 lacks. I am ready to make the payment of the loan but am not sure how to go about it. I will not be going for home loan. Also can the agreement be made without the original documents from the seller. Please suggest.
Pawan
Though you are not availing home loan but should follow the same process as original documents are not available. Please check the following post
https://www.nitinbhatia.in/home-loan/close-home-loan/
Hi Nitin, May i know which banks are offering a pre-approved loan letter. Because many of the government banks say they offer such letter only for education loans. pls give your insights on this. thanks
You will get “in-principle” approval or sanction letter. You may check with SBI, ICICI Bank and Axis Bank. Home Loan can be approved only after due diligence.
Hi Sir
I’m planning to avail home loan but the trend of banks demanding blank & signed cheques w/o any dates mentioned on them is troubling me.
Howsoever practical the reason might be, but is this practice fairly common? Even if I pay EMIs on time, should I still be worried about those blank cheques?
Can I save myself from this practice?
This is common practice to recover money in case of delay or default in payment. You can retain photocopy of the blank cheques. You will receive it back at the time of home loan closure. Handover these cheques only to the authorized employee of the bank.
Hi Nitin,
Can you help me with the stamp duty and registration for a flat in Naigaon (Thane)?
You may check with local sub registrar office.
Sir, I am selling an office for which buyer is taking loan. The buyer’s bank says it will issue the cheque of loan only after sale deed is completed and original sale deed is submitted in bank. Is this correct and safe?
Some banks do follow this process. You may note the same in sale deed and mention date by which buyer or bank will handover the cheque else the deed will stand cancelled.
Sir, I have booked the flat ( under construction ) in august 2015 and paid the booking amount of 3 lacs to builder via third party cheque ( since I was not having the amount at that time ). The builder has given the receipt of the same. Now I have return 3 lacs to the third party through cheque.
I applied for the home loan from the Axis Bank. The Bank has given the sanction and we are at the stage of disbursement of first part but the bank objects to release it saying that the booking amount of 3 lacs is not directly paid by me to the builder. The Bank is asking to show the transaction details mentioning the transaction directly from me to builder.
What is the rules? what should I do ? Pls. help
Legally bank is right. The transaction should be from your bank account. You can ask builder to refund the initial booking amount and pay again from your account.
thank you
Hi sir
Recently we are done with agreement process with 17,50,000/- in which 1000000 we are paying the cash to builder rest 7,50,000 we are going for a home loan. As per RBI RULE The banker is asking us to show that 10,00,000 transaction in the form of cheque payment but we paid that amount to builder in cash., now builder is saying i cannot show it in cheque transaction because of IT and banker says if you dont show it in cheque transaction i cannot give you loan. In this case is it necessary to show that 10lacs threw cheque. Please suggest us how to proceed ?
Any cash transaction of more than Rs 20000 in property is illegal. You should have paid 10L through cheque. Bank will not approve home loan in current scenario.
Hi sir,
I am purchasing a property which already has loan from PNB housing and i am also planning to take the loan from the same bank. Please help with the procedure involve and the things to taken care of.
Please check following post
https://www.nitinbhatia.in/home-loan/close-home-loan/
Hi Sir,
You have written a very good article and it is very helpful..
I am buying a property with agreement value of 20 lakhs. Bank personnel said that I can avail the home loan of 20 lakhs by showing the actual value as 23 lakhs of the property. He said that they will disburse cheque of 18 lakh on builders name and rest 2 lakhs on my name. Is this legal?
Thanks,
Niket
I will not suggest and it is illegal. Secondly, a seller can demand 3L more from you on the basis of 23L agreement.
The buyer of my house is taking a home loan. My question is will the amount be disbursed to me at the time of signing the sale deed or after? Since once I sign the sale deed the property is transferred and if the disbursement does not come thru, I am in deep trouble. Please advise.
You may clarify the same to buyer that you need full and final settlement amount at the time of registration. Normally banks handover cheque on the day of registration but some HFC’s release payment only after receipt of original sale deed.
Axis bank have sanctioned 3150000.00 for the flat under construction as home loan. The EMI will be 33000.00 for 15 years. Now bank has disbursed 2000000.00 to the builder for which bank is charging only interest on it per month around rs. 16000.00.
I am ready to pay the complete EMI from now onwards so that the principle amount will get reduce subsequently. Is it possible? if yes, then any additional charges i have to pay for such prepayment? kindly guide.
It is possible but please ensure that bank should charge interest only on disbursed amount under Full EMI. There are no additional charges for full EMI.
Hi nitin !
I m planning to buy a flat in chennai which cost upto 47laks .
Any banks can give me loan for full amount (47laks) ?
Kindly give me a info abt it
Thank you .
Banks will fund only 80% of total value excluding stamp duty and registration charges.
As you have mentioned bank will approve 80% of the property value and 20% has to be paid on my own. The developer is saying that 20% should be paid at the time of sale agreement otherwise loan will not be approved. Is this correct ?
My plan was to pay a token money for sale agreement and rest will be paid after registration.
The understanding is partially correct. Before bank start disbursement, they need proof that you have paid your 20% contribution. It is not necessary to pay entire 20% pay at the time of sale agreement. It depends on case to case basis.
Hi Nitin, Sorry for the long posting. Please shed some light on this case and comment.
My question is, is to get the proper cost break up of flat from Developer, whether we have to do the Agreement/Blocking amount cheque payment complete only ?
[I have made flat blocking in Bangalore, by paying 1lac cheque post dated by 7 days, as builder was offering – he will deposit cheque only after a week, if I am fine with my financial arrangements. Or else in this time frame I can take my cheque back. Overall flat cost with all components was written and given in the normal paper, without letter pad.
My bank mentioned, I will get 80% loan amount as confirmed and they will try up to 85%, which they were successful in some cases. I still want to apply for loan and will make the flat deal, if in case I get 85% from bank. Otherwise, I will cancel the loan losing part of application fee.
In the same initial week of arrangement, bank person during document collection told, the cost break up sheet I have is not proper. They need Cost Break up letter in Builder Letter Head.
I requested for Quotation in Letter Head to Developer. They wasted two days for it, by just sending again and again by email and without in Letter Head, as the bank require. On the Third day, I went to their office and they told – Without doing Agreement with 10% of the property cost, I will not going to get this document. And they haven’t received any amount credited or Agreement done, why they should be giving the Break up.
Bank was the approved bank for that project. I updated bank person the issue. He had a call with Builder. For him builder told that since no cheque encashment was done he will not give break up in letter pad.
I don’t want to do the Agreement. Since after it, if I want to cancel deal due to insufficient arrangements my agreement amount will be deducted by Rs. 1.5 lac. The service from the Developer doesn’t looks well, in a week of interactions.
I taken my cheque back in stipulated time and cancelled the booking.]
As the cheque is not en-cashed therefore i doubt that builder will share cost breakup on letter head.
Hi, We are looking to buy a resale flat on loan. We plan to give 5L as token and sign a MoU which says 20% payment to be made within 30 days. How should we record this 20% payment and is this 20% payment mandatory before registration. Can we not give it a couple of days before registration ?
Firstly you should sign sale agreement not an MOU. The MOU is legally non-binding. Lastly, you should include a clause in sale agreement that by when the sale deed will be signed and payment schedule. If you are availing home loan then the bank insist that buyer should pay his/her contribution of 20% before bank disburses the home loan.
Hello sir
I purchased flat from builder now due to financial problem I am not able to take possession by paying possession money
I have identified the buyer who is a army person and who will pay me possession amount which I need to pay to builder as down payment
Ian located in Mumbai now as per him we will prepare agreement of sale and get it registered as this agreement he has to put to bank for loan. I never heard agreement for sale being Registered prior to full and final payment also which banks require this for disbursing of loan. He says not to worry as payment schedule will be clearly mentioned on agreement I.e how much paid how much pending.
Please advise is it safe from my end to get agreement registered before final payment.
In Mumbai, there is a concept of dual registration i.e. both sale agreement and sale deed are registered in sub-registrar office.
Hello Mr. Nitin,
I bought a flat in thane, did agreement for sale by paying full stamp duty and full registration fees, now once bank clears home loan payment to seller the transaction will be complete.
Can you advise for following
1) how much stamp duty and registration charges I will have to pay when executing sale deed, since I have paid both charges in full when doing agreement to sale?
2) is there any time frame to execute sale deed, if yes then what is it ?
1. NIL
2. You should have mentioned the same in the sale agreement else there is no time frame. Either seller or buyer can delay indefinitely.
Hi Nitin,
RACPC-SBI has given me a check list to submit original documents like ( sale agreement, receipts, triparty agreement etc) to complete the documentation process of loan agreement. Now i asked whether i will get any acknowledgement letter for the set of original documents i deposit, they are saying acknowledgement letter is only provided for registered document like sale deed not for other documents.
I feel it could be risky to deposit the original documents without acknowledgement letter, what do you suggest?
The acknowledgement is provided for all the original document submitted including registered and not registered.
Hi Nitin,
Regarding point 12, Will the bank (from which my loan gets sanctioned) disburse full amount of the loan without having original papers of the property ? In case, seller has loan, original documents will be lying with sellers bank.
Yes but bank will withhold X amount till original documents are submitted to the bank.
Can my son who is 18 yrs old be a co-applicant in home loan.Later after 6 months can he apply for education loan.
Will he be automatically co-owner , as I have a 15 years old daughter also who should equally inherit the property.
After repayment of bank loan, I should be the owner only.
Mother son co-applicant.Husband not in good terms.
I doubt bank will apply this arrangement as your son is still student. Also, it is not clear how you are funding the property i.e. own contribution and who will you pay the home loan EMI.
My own contribution is 10 lacs,loan required 7 lacs. My salary is 22 K. Bank says there cannot be asingle applicant hence want to keep son as coapplicant just for rule sake. Else I can repay the loan myself thru EMI in next 5-6 yrs. But next yr for his futher studies I will require funds for which we will go for education loan, so can he apply for education loan if he is a coapplicant.
awaiting the reply
In layman terms, he will be home loan guarantor. Now for education loan, bank include one of the parents as education loan guarantor. I doubt bank will approve education loan.
education loan is of 1 lac
The amount is not important but the eligibility is.
office veriifcation, builder property verification successful.Everything OK sanction letter received.after sanction letter home veriication failed as they could not find the address hence negative remark submitted, what is the fate of the loan?
You may request for re-verification. Also coordinate with the bank.
Paid Rs 6 lacs to the buidling as token amount, not entered into agreement.
Applied for loan, got sanction letter of Rs 7 lacs. After checking the propery details ,bank says sanction loans for NA and R Zone, Since the property is either NA or R zone bank is not giving loa.n. I am doubtful if there is any other bank will give loan. hence wants refund of 6 lacs from builder
Okay. you can request builder to refund and mention the reason for the same. Wait for builder’s response.
Requested for refund, builder says he has other options of bank loan with commission of 2%. Meanwhile i have contacted agent of Aspire bank for loan, they take 2% commission, they have taken processing fees chq of 5800/ which is non refundable. What is the best thing to do
1. Take Refund from bldr and then search another property as the first bank Reliance has already approved loan.
2. Take a chance with agent of 2nd bank Aspire.
3. If bldr does not give refund than what ?
Loan flat amount is 16.84 including registration.
I have already paid Rs 2 lacs as loan, loan is still under process.
Bldr wants 4 lacs more,he say loan will be be 100% sanction else he wil refund the full amount. Approval is pending for builders documents
Should i pay him 4 lacs now or after loan approval. Pls reply immediatly as i have alreay issued cheque , will request bank for stop payment after your advice
HI Nitin Sir,
My Father bought one plot on my mother name and now I want home loan for construction purpose so can i get income tax benefit on that plot which having registry on my mother name ?????….
I have checked one bank and Bank Manager is telling me to transfer property on your name and then apply for home loan but same time he is also telling me check with some advocate and make it possible…can you please provide me your guidance on it because i don’t want to waste money to transfer plot on my name so is it any way to take home loan for construction purpose without transferring property on my name and i can able to get income tax benefit also .
You cannot claim tax benefit. The suggestion by bank manager is correct.