Land and construction loans
When somebody wants to build their dream home, they think of loans if the money is not readily available with them. For many reasons, people prefer to apply for a Loan for construction of a house than to invest the money in cash. Loans are offered by many banks and Financial Institutions for purchase of Land and Construction of house. In earlier days, providing Loans by the Banks were considered to be a service rendered by the Bank and the Banks were not willingly coming forward to provide Loans.
But as the real estate market expanded and with the increase in the number of customers in need of Loan, the banks shifted their strategy. Now, banks consider Loans as an important product for their operation, sustainability and profitability and there is a stiff competition among banks to rope-in customers for Loans.
Type of Loans:
Loans are available for various needs for customers from various backgrounds. Apart from Land and Construction Loans, Banks provide loans for starting a business, Expansion of Business, purchase of Vehicle for personal as well as commercial use, purchase of Consumer Durables etc. These loans are provided to the customers based on their income and credit worthiness. Normally the customers are generally classified by the Banks as Salaried customers, Business Customers, Self Employed etc.
The Loan amount eligible for each of the customer group and the qualification criteria for applying loan differ according to the customer group. The credit worthiness of the customer is ascertained by the bank by requesting various documents like statement from the Bank, Salary certificate from the Employer, Income Tax Payment Details etc.
Procedure for Land and Construction Loan:
Most of the Banks provide loan for purchase of Land and Construction of House. First the credit worthiness of the customer is ascertained by the Bank for granting the Loan by requesting various documents from the customer and doing some background checks by the Bank. Once the bank is convinced about the credit worthiness of the customer, then the value of the land is ascertained. In addition to the ascertainment of value of the Land, the land is checked for its proper title, type of Land and a Legal clearance is obtained for the Land. Once all these checks are done, the Bank issues the Loan of around eighty to ninety percent of the value of the Land.
The remaining amount is arranged by the customer. The land thus purchased is mortgaged by the customer with the Bank as a security. Similarly the Loan for House construction is provided by the Bank based on the building plan and the value of construction. Once the plan is approved by the bank and the value of the house construction is ascertained, the bank provides the loan to the customer.
Other Articles
