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HOME LOAN : No, it's just not a house loan !!

Home loan is the loan which is given to people who wish to purchase or construct a home. The property for which loan has been taken is mortagage to the bank as a security deposit till the loan is paid. Since its not a desirable ride as it's quite thorny and for initial years it's hard to feel at home. If a " picture perfect home " is your next call then be geared up to face the harsh realities of the financial world out there :

Preliminary rejection trouble

Many of the home loan applications do not even sail through the preliminary verification process because of the incompatibility between the borrower's qualifications and lender's requirements. Non-compliance of some of the standards facilitates rejection of your application, there are a number of criteria to be taken care of like income criteria, age criteria, lack of proper documents.

Cost of applying: Is it Refundable or Not?

Yes along with every application for home loan you are asked to shell out around 0.25% to 1% of the loan amount as demanded by the respective bank which is generally not refundable .

To obtain the certainty about the refund you need to get that in writing from the authorities concerned, which can be a tiresome job again.

Desirable loan may still be a myth .

Even though you get through all the verification process and your application fees is even intact

The bank hardly works to provide you a desirable sanction.

The amount that can be financed typically depends on the status of the borrower (resident/non-resident), type of home loan (renovation, property purchase, property extension) and the financial institute. It is generally offered for up to 80-85% of the cost of the property.

The amount of loan sanctioned is subject to the repayment capacity of the borrower. Several factors are clubbed together ranging from your monthly income, financial history, credit card usage history, bounced checks (if any) to nature of your employment to define your credibility. In case your eligibility falls short than the required then you are left with three options, one of forgetting about the loan or wearing your convincing shoes and ask people to be your co- borrower or just bid off your NSC's , provident fund, LIC policies ,funding home renovation etc as collateral.

The common fix about the interest rate regime ?

The two famous loan regimes of the financial world are  simply puzzling . Every borrower has an option of either going for a fixed rate or floating interest rate. Moreover after deciding on the regime the underlying meaning of the contract may create undesired havoc.

Moreover the fixed rate regime is not a safe bet, it pitches you against a fixed rate that can be changed in every 2 years. So ironically you can call it  the volatile -fixed rate because all the catches lie in the fine prints of these contracts.

Bridging the gap

The banking experts evaluate the value of the property according to their predetermined standards. The amount evaluated by them may lag behind the actual market price , that pushes you to eventually shell the difference from your own pocket.

Dread of the down payment.

Already the processing fee and evaluation difference might have created a whole in your pocket but that's not the end, because an initial down payment formality still awaits you. For a home loan of 10 lakh this could mean anything between 1-2 lakh, ready availability of this amount is a prerequisite for a smooth sanction.