What is the Process of a Mortgage Loan? The Documentation, Stages & Step to Know

Process of a Mortgage Loan

Financial requirements are unpredictable, and they can arise anytime. It can either be sudden or planned, even professional and personal. Some loans are such that you don’t feel burdened taking them. It is because you’re either considering it for future investment. Or it is very to you, like a home loan or any other asset. One such factor under it is the ‘Mortgage for Loan’.

Getting a mortgage loan and going through the process of Mortgage Loan may seem to be daunting. You are unaware of how it works, what it is, and so on. Banks may seem to help you with it, but you have to know your part. Before you pen over and sign any agreement, here’s a list of things you need to know. Let’s understand Mortgage loans in detail.

What is a Mortgage Loan?

Mortgage loans refer to a process of offering something which comes with a guarantee against a loan. Any home loan, be it any type, will come as a secured loan, and the borrower will have to offer their property as a security to the lender. A property mortgage is a sort of collateral until the time the borrower repays the full loan money. Mortgage loans are often said to be loans against property. Individuals often use mortgage loans to either buy a house or build it.

Understanding Registered or Non- Registered Mortgage Loan

In India, there are two distinguished ways to avail of a mortgage loan. One is registered and non-registered loans.

When talking about registered mortgage loans, it is when the agreement deed gets registered. The local registrar registers it, giving the lender full authority over the property. However, different banks have different preferences, but mostly registered mortgages are preferable in India. It gives a sense of security and power in case the payments are not made. Banks can seize the property if the borrower fails to repay the money in the desired time frame.

When it comes to non-registered loans, there isn’t any registrar involvement. Borrowers deposit some valid documents of the property they wish to mortgage to the bank. Then comes the approval procedure after reviewing the documents and evaluating the property.

Process of Mortgage Loans

Documentation Stage

The process of Mortgage loan depends on the kind of property to the mortgage! For residential property, the process is pretty straightforward. It merely requires income proof, ID proof, and address proof with the loan application. Also, the lender’s details are required to ensure the claim of the property to be mortgaged. Once all the documentation is submitted, it will move to the bank further. They conduct a proper valuation of the property and accordingly disburse the amount.

If it is a commercial property, the process is a bit different. The borrower must submit ID proof, income proof, address proof, and ownership document. Plus, they will also be required to submit a property valuation report. 

For commercial land/guide-to-property-valuation/”, the borrower can only mortgage the leased property provided to them concerning the lease deed permit, and they can present a consent letter, too, from the lessor.

If you’re in a rush to avail of the loan quickly, submit documents on time and quickly. The lender will take their time to evaluate your information and verify every detail of it.

Submitting Application

The process of Mortgage Loan will begin, and it can be a bit tricky. The first stage is where your lender will fill out an application and ask for your income, debts, assets, and other ID proof documents.

Home Inspection

You must ensure the home inspection is conducted as soon as possible. It is what will help you understand the real condition of your home. And, when you do it quickly, you have time before the closing date for negotiating. The negotiation will be fair since you have a sense of all the issues in the home, if any.

Always be Attentive

If you know your eligibility and your application for a mortgage is approved, this process comes into action. Here is when you will get conditional approval. The lender will have to submit some additional documentation, and they will need your help, so be very prompt concerning that. Make sure you keep your application moving forward without any delay.

Homeowner’s Insurance

Here, the lender will be required to submit proof of insurance. Before the loan process takes place, this has to be done, and it is mandatory since the final approval will be received after the insurance is verified.

Keep a Check on What’s Happening

There is a high chance that your lender may request a home appraisal. This phase is only to make sure the value of the property they are selling aligns with the purchase price. Here is when the appraiser visits the home, they will evaluate it entirely. Further, they will compare the property with the homes they have sold in a similar price range.

Lenders will also move forward with title searches to ensure no issues. There can be chances of outstanding liens on the property, which need to get cleared before selling. Your right is to evaluate and understand more about the home appraisal process.

Don’t Add More Debts

When a mortgage loan, it is best to keep it to the minimum. Try not to overspend or use your credit card. It will affect your finances, and the new loans also change the debt-to-income ratio. On your way to mortgage approval, the least you can do is not add more debts.

Rates Should Be Locked

If you haven’t come across this term earlier, it is essential to know about it. Locking the interest rate happens with the lender, and it must be locked in before the closing date, around ten days, maximum.

Document Reviewing

After the loan is approved, an inspection, title search and even appraisal are performed. The lender will then set a closing date, instruct you on money too, and guide you on how much money they need during the closing.

Make Arrangement

To cover your down payment, you are required to make arrangements for that. Be mentally prepared that you are required to pay a set of money every month. Also, know and evaluate the closing costs and how you will pay them.

Closing

During the closing stage, be sure you pay on time and even evaluate all the documents thoroughly. If you have any queries regarding the terms or conditions, ask them! After you are clear with the terms and payment-related processes, you can sign the document. You are all done having your home and can celebrate living in it.

Conclusion

The process of Mortgage loan and going through the process is very challenging. If you don’t know what to expect from it, you may find yourself in a pitfall. In cases like this, you have to be sure of what to do, how to go about it, what to expect and so on. Most people skip essential steps like loan verification, document verification, and home inspection. If you miss out on any step, you may find challenges later in the process.

Knowing how much you can afford and how you will manage to pay for the loan is best. You must be financially strong to repay the loan amount every month. Plus, be careful with the due dates since a little delay can add more trouble. It will be best if you try and avoid taking any further loans in the meantime. Focus on repaying quickly and without any delay.

FAQs

What if the borrower dies who has taken the mortgage loan?

If the borrower dies, the lender can reach any family member, guarantor, or legal heirs. The financers can help families to repay their loans.

Can a mortgage be transferable?

The buyer can file a new home loan application if the transfer happens in the bank through an internal process. They have to pay for the applicable charges too.

How many types of mortgage loans are there in India?

There are six mortgage types: simple mortgage, usufructuary mortgage, English mortgage, mortgage by conditional sale, mortgage by title deed deposit, and anomalous mortgages.

What if you don't pay the mortgage?

Bank gives you a time limit to pay for the missed loan instalment through a legal notice. Or else they will send an auction notice for the estimated property. And further, they can seize the property.

Is paying a mortgage early good?

It is the most innovative way to pay your loans. You can neither work on preparing the entire outstanding amount. Or it can be done partially to help you quickly get cleared with the loans.