Introduction
The word ‘Loan’ gives rise to many emotions. It is one of the most frequently uttered words in the financial sector. Loans are popular because they fulfil the aspirations of both ordinary people and big business houses. Be it a brand new car or a comfortable motorcycle, be it a dream home or a new factory, a loan is always there to make your dreams come true. A mortgage loan, or loan against property, is a particular type of loan that you may avail of by keeping your residential or commercial property as collateral security with the lender.
This article discusses the most popular loan of all times – mortgage loan; and acquaints you with the 6-step process for approval for a mortgage loan at attractive interest rates.
The 6 Steps of the Mortgage Loan Process
Lenders divide the mortgage loan approval process into six distinct phases. Let us understand the steps, one at a time.
- The Pre-Approval Stage
Once you express your desire to apply for a mortgage loan, the lender goes through your application and determines its merit. They evaluate your credit history and check the credit report. They pay close attention to your obligations and lines of credit.
After evaluating your creditworthiness, the lender pinpoints the amount you are suitable for and quotes the downpayment amount and mortgage loan interest rate and sends it to the next stage of the loan approval process.
- Estimation
After you apply for a mortgage loan and get the pre-approval, estimate the cost of your project. As a mortgage loan is secured, you may use it for any purpose you wish to.
Visit a few vendors, take their rates, and compare it. Keep all quotation letters in a safe place. After comparing vendors, select the one who offers the best quote.
Make sure to retain all bills and invoices that you would obtain during the project. It may enable you to get an appraisal of the mortgage loan amount, should there arise a need for the same.
- Documentation
You now enter that stage when the lender asks for your documents. To apply for a mortgage loan at low-interest rates, you need to furnish documents such as:
- Latest passport-size photograph
- Age proof
- Address proof
- Identity proof
- Income statement
- Bank account statement
- Form-16
- Income Tax statements
- Property documents
- Processing fee cheque, along with the application form.
Some lenders require a few additional documents about the concerned property.
- Processing of Loan
In this step, the loan processor collects and segregates all documents that you have submitted. Lenders often call the employer to verify the facts. If you are a business-person, the lender might call the Chartered Accountant to check your Profit and Loss statement.
Some lenders skip the pre-approval process and pull-in the credit report at this stage. They also conduct property assessment, if not already done.
- Underwriting
The penultimate stage is all about checking the validity of your loan. An Underwriter is the most crucial person in your loan application and approval process.
The Underwriter checks the property documents and determines the efficacy of the mortgage loan amount and interest rate. An Underwriter is one with a hawk’s eye. S/he verifies everything from top to bottom and tries to find out any anomaly between the borrower’s profile and loan repayment capability.
After evaluating the merit of the application, the Underwriter approves the mortgage loan or rejects it.
- Loan Disbursement
The final step ends with you receiving the money you want to. The mortgage loan amount gets credited directly to your account that you mentioned during the application process.
The repayment tenure begins precisely after a month from the date you receive the amount. Check the amount as soon as you get it.
Conclusion
A mortgage loan is an excellent choice if you require a loan urgently. Unlike many other loans, mortgage loan interest rates are low and offer longer repayment tenor.
Before applying for a mortgage loan, check whether you meet the eligibility criteria or not. Compare a few lenders and choose the best. To find the best lender, look at their client reviews, branch network, customer service quality, and the range of loan offerings. Generally, a reputed lender would offer you a mortgage loan at an attractive interest rate with up to 30 years of repayment tenure.