Know Step-by-Step Process For Home & Mortgage Loan

Posted by loanfasttrack on March 27th, 2020

Many of us are already aware of the loan process for various types of loans. But for those who have a fair knowledge on the internal process of loan application and for those aware mass who want to upgrade themselves with the same, here is the step-by-step knowledge on loan process. Even if the lender institutions (Banks/NBFCs) may differ in their marketing style, advertisement approach with ROI (rate of interest) & PF (processing fees), etc, yet the internal process for all institution remains the same. In the previous blog “Quick Guide for Home Loan Seekers” we have given a precise overlook on the application for the loan process and its relevant things, taking it forward we will describe now the INTERNAL loan process of home & mortgage loan for the borrowers.

1) Sanction Process- When a loan file is logged-in with the bank/NBFC it passes through various departments before it gets finally sanctioned. No single person carries out the entire process rather the file passes scrutiny under many hands before it is finally forwarded for sanction.

a) Initial Scrutiny of the documents & duly signed form. The login desk verifies for any incomplete documentation, highlights the list of pending documents, verifies the signatures on the form and once with the clear documentation it process further to punch the file into the system as logged-in & immediately processes the cheque for logging fees/processing fees.

b) The login desk then makes a CIBIL check of the file. The CIBIL score of the borrower is then attached with the file.

c) The RCU (Risk Containment Unit) team then checks for any fraudulent / forged documentation. The borrower’s KYC -pan card, aadhar card along with the address proofs provided are counter verified with the government official sites. The RCU may sample the file from time to time if they doubt any suspicion in documentation.

d) The next is the FI visit which is arranged at borrowers residential & official address mentioned on the form. FI is the field investigation that verifies the facts of the borrower he discloses on the form, relating to his residence and office related facts-his designation, experience, whether employee etc.
A FI desk then sends the FI report to the loan department. The FI is the internal team of the banks/NBFCs. A negative FI can also form a base for rejection or withdrawn of the file.

e) Along with all the remarks from FI desk login desk & RCU team the file is forwarded to final stage to the credit manager, who is the main decision making authority for loan sanctioning. The credit manager then analyzes the case, calculates the eligibility considering the risks involved with respect to FOIR (fixed obligation against income ratio), LTV (loan to value) norms and makes a call to the borrower which is called as the Personal Discussion to authenticate the borrowers loan requirement needs. On successful discussion the file is further forwarded for sanctioning to the higher authorities (of credit), who then gives their approval for the same. The credit managers reserve the authority to approve or withdraw or reject the case at any stage if they aren’t comfortable with the same.

f) The approved cases then need to pass the tray of the sales hierarchy to get the nod on the approval for rate of interest and the processing fees.

g) Only on receiving all the relevant approvals the final sanction letter is given. It is printed on the letter head of the issuing bank/NBFC.

On the contrary with respect to few nationalized banks there are no such individual departments for loan sanctioning and it is pretty simple process of co-ordination since the sanction process is single handled by a bank official.

The entire process of sanction is the process of 5-7 working days. It holds a validity of minimum 1 month to maximum of 1 year, depending upon the lender bank/NBFC you choose.

2) Technical Process- A physical inspection of the property is done in order to be assured of its current market value & the age of the property so as to ascertain-that the banks do not over lend of the cost of the property. The property technical is the process of again 3-5 working days, and is usually carried out by the external agencies with whom the bank has a tie-up with. The Xerox of the property paper-agreement copy, index 2, OC, property tax, CC & plan copy is made available to these agencies in order to generate the technical. The technical report of the property is so generated and is handed over to the respective loan process branch.

Many a times the technical is initiated at the initial stage of file login process. This helps to reduce the time frame of loan process.

3) Legal Process – Such is the process which is to be initiated only after the loan is sanctioned. The legal of the borrower’s property papers is mandatorily carried out in order to ascertain the property’s clear title. A Xerox set of all bunch of property papers (index 2, agreement, OC, etc) is sent to the bank’s tie-up external lawyer who then generates the legal report for the property. The lawyer then arranges to send the legal report via courier to the concerned branch. The entire legal generation is the process of 3-5 working days.

4) Disbursement Process – On the successful completion of all the processes mentioned above, the file proceeds further for the last stage of disbursement process. A disbursement is the process of another 7-8 working days. A docket kit (bank’s disbursement agreement kit) has to be signed by the loan borrower along with his co-borrower if any. All original property papers needs to be submitted with the bank along with the docket kit. The bank ensures that the borrower has paid all charges- processing fees, administrative- legal & technical charge & the disbursement charge of franking, stamp duty, etc  (you can go through the list of all important charges on our blog-“Don’t Get Fooled!! Know All Costs In Home Loan) before it does the final disbursement of the loan amount. The internal disbursement process is as below:

a) Docket Login. The duly signed and filled docket kit is login into the system. It is checked thoroughly. Necessary corrections are made if required.

b) A DM sheet is made. A DM is the credit sheet which is to be filled with the important details of the clients which includes filling his property details, cheque favouring details, cheque date, etc.

c) RCU. Once again the RCU team conducts the document check of all the original papers submitted. The property papers-index 2 copy, etc are counter checked with the sub-registrar’s online link facility. The TDS, form 26AS and any tax related documents are confirmed through online portal of IT department of India. If required the RCU can sample the suspicious document till such time the disbursement process is kept on hold. Only on the successful re-verification of the same the process is allowed further.

d) Sign Up by Credit. A complete set of disbursement file along-with the RCU verification, DM sheets and the docket kit is then forwarded to the credit manager for the disbursement sign up. The credit manager then studies, reviews, reinvestigates on the file, re-calculates and re-confirms the figures matching the eligibility criteria in light to the bank’s policies and laws. It takes about 1-2 hours to review a single file for the credit manager. Finally on the satisfactory review the credit manager sign-up the docket. It is a significant part of disbursement; the credit manager is the signatory authority who certifies the check on financial credentials of the borrower and accordingly approves the loan amount.

e) The loan amount cheque is finally to be printed. The responsibility is delegated to the operation team. Prior the cheque printing the operation team again checks for any other query (charges cheque clearance, OTC clearance etc). Any query emerged if any is to be sorted out on priority to ensure the timely cheque cut of the loan borrower. The cheque is then hand over to the client or the loan amount is directly disbursed to his account.

There are banks who also allow the OTC format of disbursement. Under such format a disbursement cheque cut is done prior to the submission of the original documents. The RCU verification is compulsorily done on submission of the OTC documents. . Only after the OTC clearance the cheque is handed over to the borrower.

The total time required for processing the loan is about 15-20working days, depending upon bank to bank & NBFCs, and is subject to documentation. If the borrower arranges the required document as per check list at one go the process may turn around even faster than the estimated TAT period of the banks/NBFCs.