5. Difference in property valuation
The bank has its own experts for legal, technical and financial appraisal of
the property in question. It evaluates the property on its own established parameters
and assigns a value to it. This value can be significantly lower than the price
you quoted for the property. Thus the bank will only lend you up to the amount
it valued. This can cause a significant gap between what you need and what
the bank is willing to lend. To avoid this situation the borrower can get the
property valued before applying for home loan from a bank approved valuator.
6. The down payment
Banks require the borrower to fund at least 10% to 20% (varying from bank
to bank) of the entire loan amount as the down payment for the home loan. This
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. For a home
loan of 10 lacs this could mean anything between 1 to 2 lacs. This 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. This effectively increases
the down payment. The obvious remedy to this tricky situation is to get the
property valued beforehand and have the down payment ready. Some banks also
allow NSC's, provident funds, LIC policies etc for down payment. It is generally
a good procedure to check the down payment requirement of various banks and choose the
one which requires the lowest amount to be deposited initially or fits your budget well.
7. Title deeds and NOC Documentation Problems
The title deeds and NOC documents have to be furnished in the bank's format.
Borrowers who don't provide such documents in proper format, will ruin the entire
exercise and won't get any home loan. To avoid falling into such uncomfortable
situation, enquire about all the documents required by banks beforehand and
take necessary steps to get them ready within the stipulated time frame.
The above mentioned problems are very common, but can be easily avoided if
the borrower follows proper procedure, prepares adequately before applying and
takes care of correct documentation.