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7 most common Home Loan problems faced by borrowers in India

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. ach problem is discussed in detail and appropriate remedies are mentioned along with it. !he ob"ective of this article is to ensure that your home loan becomes a hassle#free e$perience. 1 Rejection at the first stage %trange but true, many of the home loan applications do not pass even the first test. !hey are out rightly re"ected due to incompatibility between the borrower's &ualifications and lenders re&uirements. 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. !he best way to avoid being re"ected in this way is to check the eligibility re&uirements of lending banks carefully and apply only to that bank which matches your profile. 'eeping 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 (ith every application form for home loans, banks re&uire about ).*+, to -, of the loan amount to be submitted as the processing fees. !his processing fees is generally ./! 0 12.345L . 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. !his 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. 4 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 !he loan amount sanctioned is based mostly on repayment capacity of the borrower. 6any things come into picture, when the bank decides how much home loan a person can get. !he 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. !hese factors all clubbed together help the bank to decide whether it will be able to recover its money satisfactorily or not. If you get re"ected 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 .%7's, provident funds, LI7 policies etc. you can keep them as collateral and ask the bank to finance your home loan. 4. The interest rate dilemma (hether to go for a fi$ed rate or floating rate interest for home loans is a dilemma which almost every home loan borrower faces. ven after deciding on a particular loan regime, the home loan terms and condition fine prints can create havoc with your interest rates. 1or e$ample even if a borrower has opted for fi$ed rate home loan and the bank has promised him a rate which he feels is good, the catch is in the fine prints which authori8es the bank to vary this fi$ed rate every * years, things can go worse for the fi$ed rate borrower. %imilarly 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. 4voiding 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. 4sk your bank for some historic floating rate changes.

5. Difference in property valuation !he bank has its own e$perts for legal, technical and financial appraisal of the property in &uestion. It evaluates the property on its own established parameters and assigns a value to it. !his value can be significantly lower than the price you &uoted for the property. !hus the bank will only lend you up to the amount it valued. !his can cause a significant gap between what you need and what the bank is willing to lend. !o avoid this situation the borrower can get the property valued before applying for home loan from a bank approved valuator. . The do!n payment 5anks re&uire the borrower to fund at least -), to *), 9varying from bank to bank: of the entire loan amount as the down payment for the home loan. !his amount has to be deposited before the disbursal of the home loan. In the absence of such down payment the bank will refuse home loan to the borrower. 1or a home loan of -) lacs this could mean anything between - to * lacs. !his amount must be readily available with the borrower. In a scenario where the valuation of the property by bank is considerably lower than the market price of the property, the balance will also have to be paid by the borrower. !his effectively increases the down payment. !he obvious remedy to this tricky situation is to get the property valued beforehand and have the down payment ready. %ome banks also allow .%7's, provident funds, LI7 policies etc for down payment. It is generally a good procedure to check the down payment re&uirement of various banks and choose the one which re&uires the lowest amount to be deposited initially or fits your budget well. ". Title deeds and #$% Documentation Pro&lems

!he title deeds and ./7 documents have to be furnished in the bank's format. 5orrowers who don't provide such documents in proper format, will ruin the entire e$ercise and won't get any home loan. !o avoid falling into such uncomfortable situation, en&uire about all the documents re&uired by banks beforehand and take necessary steps to get them ready within the stipulated time frame. %onclusion !he above mentioned problems are very common, but can be easily avoided if the borrower follows proper procedure, prepares ade&uately before applying and takes care of correct documentation.