Why Is Legal And Technical Verification Key In Home Loan Application Process?
The appraisal of a home loan is not a one-step process. You will not get the sanction letter in one day. The home loan application review involves various stages and formal procedures for approval.
The process of getting a home loan can be daunting if you have never taken a home loan before. Ignorance of seemingly minor facts can get you into trouble, and can cost you a lot.
This is why you should understand the entire process and know the parameters and various filters banks use if you want your loan to be sanctioned.
One critical stage in assessing home loan applications is the legal and technical verification of the property.
MakaaniQ gives you details about the importance of legal and technical verification process.
What is legal and technical verification?
The validation and valuation of properties from a legal and technical aspect forms an important part of checks and inspection of the home loan process. A substantial amount of the home loan amount depends on the legal and technical valuation of the property.
Banks and financial institutions verify the property against which the loan is taken. Lenders also verify the property for which you are taking the loan. Home loan is a secured loan, in which the property is used as security or collateral. This is the reason why you are asked to submit original property documents (like Title Deeds, No Objection Certificates of authorities and other ownership papers) to the lender. These ownership documents remain in the custody of the lender until you fully repay the loan.
During credit appraisal, these documents are used for legal verifications. This means that these documents are used to verify that the property has a clear title, and that the home loan is being disbursed to the right owner of the property for legal and valid reasons. No lender ever funds disputed properties or properties that do not have clear ownership titles.
You must seek expert advice if there is any missing title chain document before you approach the lender for a home loan.
Apart from the legal checks, banks also conduct the technical evaluation of the property. Many banks have a list of approved projects, and if you buy a flat in the approved project of the bank, there will be no legal and technical valuation of property. This is so because the lender has already assessed the legal and technical features of the project as a whole. Buying property in an approved project of the bank saves much of the time spent on credit appraisal.
However, in the case of resale, top-up or balance transfer of home loans, technical valuation of the property is important to estimate the market value of the property. Maintenance, the age of property, level of construction, square feet and built up area, quality of construction, required legal clearances, the locality and special comments are few other points that lenders need for home loan application evaluation, other than the market value of the property. Every lender funds a fixed percentage of the market value of the property.
The sole motive behind legal and technical verification exercise is to ensure that the property has a clear title, is free from encumbrances, technically sound and meets the valuation standards of the bank.
Quick tips for legal and technical verification
- No lender should ever ask you for legal and technical verification fees separately, because the cost of these processes are included in the processing fee that the lender asks you to pay before the home loan appraisal process begins. Read the home loan agreement carefully to know more about these valuation charges.
- You must not feel irked by these valuation processes. Experts of their respective fields conduct these verifications. You will be able to be sure if the property is legally and technically sound.