Documentation – Application, Sanction and Disbursement

Documentation – Application, Sanction and Disbursement
The documentation of all housing finance companies were, more or less, similar while aiming at common goal to establish credentials of the clients. For self employed and Business class the documents required were almost same except for few companies like Housing Development Finance Corporation, LIC Housing Finance Limited and Standard Charter Bank.
Common documents required by companies are :
i) Application form
ii) Applicant’s Photos
iii) Identity Proof
iv) Residential Proof
v) Educational Certificates
vi) Age proof
vii) Salary slips
viii) Form 16
ix) 6 months bank statement
x) Income Tax Returns
xi) 3 years audited P & L, Balance Sheet
xii) Property Documents
xiii) Business Profile
xiv) Credit Card Statements
Sanction Disbursement stage requires no additional documents except for Housing Development Finance Corporation (HDFC) , Citibank and LIC Housing Finance Limited. Normally the process of the stage requires property and security documents for most of the banks. Housing Development Finance Corporation requires mortgage deed of property, deposit of legal title of the property, property documents with all mother documents and interim security if property is under constructions.
Sundaram Home Finance Limited requires property documents along with copy of approved plan. Although the company’s presence in Mumbai is negligible, the company has good credit policy to protect its interest in long run.
LIC Housing Finance Limited insist upon copy of agreement for sale, copy of registration receipt, copies of receipts of payment to the seller and No Objection Certificate (NOC) from Builder or Society. The company also requires, if the seller is Cooperative Housing Society : allotment letter, original share certificate, society registration certificate, copy of sale / lease deed in favour of society and No Objection Certificate (NOC) of the society besides land conveyance and Occupational Certificate issued by Mumbai Municipal Corporation.
It requires, if seller is public agency, direct allotment in Cooperative Housing Society by Public Agency : Allotment letter, Original Share Certificate, Society registration certificate, lease agreement, public agency’s approved list of members for the society, No Objection Certificate from society, No Objection Certificate (NOC) from agency. The resale transactions requires to furnish all previous registered documents, agreement for sale duly stamped and registered, No Objection Certificate (NOC) from society and original share certificate.
To have a detailed view of the documentation, LIC Housing Finance Limited and Citibank are best examples to look into.
LIC Housing Finance Limited :
For salaried profile, salary slips of government employees and repeated organisation are readily accepted. In the case of private Limited and unknown companies, it was found that salary slips were cooked up and also the income tax return copy was manipulated while photocopying. Hence, it is a practice to have income tax return copies verified with the income tax department in respect of salaried individuals of unknown companies. A dim view is taken in case there is and excessive depreciation content in the Profit and Loss account. A standard set of minimum documents is required with the application ; these are for proof of income, proof of identity and title to the property. In the case of government employees, documentation is reduced due to competition. For construction loans, verification of title is followed by scrutiny of various municipal consents on aspects such as Urban Land Ceiling and Regulation Act, zoning (Coastal Regulation Zone/ No Development), Transfer of Development Rights (TDR) and any encumbrances. Reputed builders take a pre-sanction from LIC Housing Finance Limited on clearance from various agencies. The legal department is out-sourced. This department mainly looks at possession, encumbrances and restriction on usage of land. In the case of resale the life of the constructed building and outstanding dues of the previous owners is verified. In the case of purchase from builders, a pre sanction obviates the need for repeated title verification. No loans are given for purchase of plots. In the case of home extension loans, municipal consents are verified. In the case of home improvement loans there is scheme called Gruh Sudhar, here the interest rates are slightly higher as the end use cannot be controlled. There is now no restrictions on the number of loans that individuals can take. Every new loan is treated as separated account.
Citibank :
The basic documentation for applications are three months salary slips, Form 16 and in the case of non salaried applications it is three years financial statements and Income Tax Returns. In the case of weak proposals, extra documentation may be insisted upon. The bank has devised its own checklist for credits appraisal of self employed and business persons. In the case of business profile the depreciation and bottom line are ignored and substituted by a gross margin percentage on the total income ( i.e. 30% of the total income) to access the eligibility. Installment to income ratio 60% in the case of salaried individuals and 50% in the case of others. Loan to value is set at 85%.
Many banks calculate income ratio to expenditure for assessing the capability to pay back the loans.24
The Citi bank also insist upon Memorandum of Association if loan request is from Indian registered company. For Public Sector Undertaking and government employee additional documents includes two year’s Form 16 and payslip. If non continuation in the employment, appointment letter within 15 days must be produced. Signature verification from bank, bank statement of self and of the firm, if self employed, copy of Over Draft account statement, statement of car loan if any and five client’s address if self employed, are additional documents required by the bank.
No Objection Certificate from co-operative housing society is another big problem. Society do not co-operate with the member borrower. Sometime No Objection Certificate format from Housing Finance Companies are very objectionable. The draft of No Objection Certificate gives power to Housing Finance Companies to mortgage entire plot of land on which the society’s building stand.

Documents required to be submitted at the time of application :
Basic Requirement to avail a home loan
Owing a home is perhaps the biggest and most important dream of an average family therefore ownership of a home goes beyond pure financial considerations. Home loans has witnessed an increase owing to competition between a number of public and private players.
Basic qualifications for a home loan (Resident Indian)
A resident Indian is eligible for a home loan if he satisfies the following conditions:
i) He / she must be earning a regular monthly income.
ii) If he / she is from the salaried class, then he should a minimum of 5 years of service left.
iii) If he / she is a business person or a professional or a self employed individual, then his / her age should be less than 58 years at the time of applying for the loan.
iv) The property that he wishes to purchase/construct should have a clear and marketable title.
There are certain sets of documents that need to be submitted at the time of application. The documents sets will vary according to individual status- either resident or non-resident in India, as also the type of loan that an individual may want to avail of.

Resident Indian
Salaried Individual
i) Salary slip/Form 16A.
ii) A photocopy of the first and last pages of ration card or copy of Permanent Account Number /telephone/ electricity bills.
iii) A photocopy of Investments (Fixed Deposit certificates, Shares, any fixed asset, etc) or any other documents supporting the financial background of the borrower.
iv) A photocopy of Life Insurance policies with the latest premium payment receipts (if any).
v) Photographs (as applicable).
vi) A photocopy of bank statement for the last six months.

Self employed or businessman.
i) A brief introduction of business/profession.
ii) Balance sheet, profit & loss account and statement of income with Income Tax returns for the last 3 years certified by the Chartered Accountant.
iii) A photocopy of advance tax payments (if applicable)
iv) A photocopy of registration certificate of establishment under shops and establishments Act/ factories Act.
v) A photocopy of registration certificate for deduction of profession tax (if Applicable).
vi) Bank statements of current and saving accounts for the last six months.
vii) A photocopy of certificate of practice (if applicable).
viii) A photocopy of any bank loan (if applicable).
ix) A photocopy of the first and last pages of the Ration card or a copy of Permanent Account Number / telephone/electricity bills.
x) A photocopy of investments (Fixed Deposit certificates, shares, any other fixed assets).

If flat is purchased from builder
i) Original copy of the agreement with the builder.
ii) 7/12 extract of the agreement with the builder.
iii) Copy of Non Agriculture permission for the land from the collector.
iv) Search and title report (with the details of the documents) for the last 30 years .
v) Development agreement between the owner of land and the builder.
vi) Copy of the order under the urban land ceiling Act.
vi) Copy of building plans sanctioned by the competent authority .
vii) Commencement certificate granted by the corporation/Nagar Palika.
viii) Building completion certificate (if available).
ix) The latest receipts of taxes paid .
x) Partnership deed or memorandum of association of the builder firm.

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