Applying for the residential loan – What will the banker see before approving

One of the most important forms of consumer loan is “real estate loan”, issued for the purpose of construction or acquisition of land, apartments, homes, shops or any other residential or commercial property. Mortgage has transformed into an industry, helping many middle class families to have possession of home. However, real estate loans (especially mortgage loans) are always regarded as the most risky types, mainly because of the amounts involved (and also because of the maturity time). That is why the banks who are lending must look into many aspects before issuing residential loans, in order to minimize the risk (because the maturity time often extends to 20 – 25 years in these loans).

Below are some of the factors that a banker may consider before it approve or disapprove a loan application.

Income level:

Bankers have got to make sure that the person applying for real estate loan has a steady and reasonable income coming every month. They will look into the source of proceedings and determine the net income. In case you are a salaried person, they may need some confirmation from your employer, the reputation of your employer may also come into play; for example Government employees are often preferred over private sector employees. They will also check the duration (for how long you have been working with the current employer). Similarly, business people should be having a stable, incoming cash flow; huge ups and downs in the profits are not a good indication.  

Necessary Documents:

Depending on the type of loan you have applied for, you may need to present different kinds of documents. These documents can be, National Identity Card, Birth Certificate, Employment letter, pay slip, Title insurance, profit and loss statement, proper plan of construction (if you are applying for a construction loan), or credit history (if you have any). All of these documents should be indisputable because the verification department will double-check all of these documents; and any vagueness means your application will be rejected.

Interview:

Meeting with a loan officer is actually the first and an integral part of the process; the officer will inquire about your requirements and form an opinion about your credibility. The interview also serves as a verification of your physical address. When meeting with the officer, stay calm and do not go to extremes for showing how desperate you are for this loan, as it is not going to make any difference. You can also ask the officer to lay down terms and conditions (especially the interest rate or any other service charges) in simple words.