The national housing policy of India need more houses for the citizens. Hence, the government established institutions capable of providing housing finance.
One can get a home loan from non-banking finance companies (NBFCs). NBFCs include Housing Finance Companies (HFCs). You can choose where to get a home loan by comparing different tenures, interest rates, and processing fees.
What are Housing Finance Companies?
Housing Finance Companies are entities registered under the Companies Act that primarily engage in the direct or indirect provision of housing finance.
National Housing Bank (NHB) was the sole regulator of HFCs. However, rising stress and other issues tempted the government to delegate HFC regulation to the RBI by amending the statutes. At the same time, the NHB will retain some regulatory authority over HFCs.
Objectives of Housing Finance Companies
NHB was established to achieve, among other things, the following objectives:
- To promote a sound, healthy, viable, and cost-effective housing finance system that serves all segments of the population and integrates the housing finance system with the overall financial system.
Housing Finance companies promote inclusive growth while maintaining stability in the housing finance market. This entails providing sound and cost-effective housing finance to the country’s underprivileged and privileged sectors.
- Encourage the development of a network of dedicated housing finance institutions. Housing finance companies should be plentiful throughout the country and easily accessible.
- To increase sector resources and direct them toward housing. Housing Finance companies ensure that primary resources allocated to various sectors should be focused on sound and affordable housing before all other needs.
- To make mortgages more affordable. With Housing Finance Companies, mortgages will be more affordable as lending standards are relaxed and all-inclusive.
- To regulate the activities of housing finance companies under the Act’s regulatory and supervisory authority. Governmental authorities regulate and account for all activities and ventures of various housing finance companies.
- Encourage the expansion of the supply of buildable land, building materials for housing, and upgrading the country’s housing stock. Housing finance companies must also account for all building materials, from labor costs to cement, paints, etc.
- Encourage government agencies to become facilitators and suppliers of serviced land for housing.
Government agencies assist in the provision of housing land. The government of India set a target of INR 3.50 Lakh housing units for 2009-10, but only INR 3.87 Lakh were funded during that time.
How Do Housing Finance Companies Work?
When a housing finance company lends a housing loan to an existing house for rebuilding or expansion, the house is mortgaged to the financing company until the loan is repaid.
During this procedure, the borrower agrees to the Transfer of Property Act. With this, the house to be built is mortgaged to the creditors. The borrower or the mortgagor cannot sell the house to anyone else until the loan is paid off. In other terms, the financing institution has a charge on the borrower’s property until the loan is repaid.
Before deciding on the best loan option and lender, it is suggested that the borrower uses an online home loan mortgage calculator to compare home loans.
A mortgage calculator computes and compares EMI, among other things, to assist the borrower in obtaining the best loan possible.
When the mortgage is paid off, the mortgage is removed, and the owner takes ownership of the home. The owner has the absolute right to transfer or sell to whomever he wants.
Why Choose Housing Finance Companies for a Home Loan?
- Credit scores aren’t a hurdle
HFCs are not overly concerned with credit scores. Instead, they consider the practical aspect of determining the low score. HFCs take a pragmatic approach to the situation and assist their customers accordingly.
- A larger loan amount
In the case of HFCs, loan eligibility is based on two main criteria: the Loan to Value Ratio (LTV) and the customer’s repaying capacity based on their annual cash flow. However, HFCs are flexible in assessing income because they use well-defined surrogate methods that increase loan eligibility with regulated LTV eligibility.
- Simple documentation
Because HFCs are more relaxed about the documentation process, they can grant loans to their borrowers in a shorter period. A loan application must be accompanied by identity proof such as a PAN card, passport, etc. Salary slips and bank statements for the last six months, along with Form 16, are required as proof of income for salaried individuals. Self-employed individuals and professionals must submit ITRs for the previous three years and duly certified documents.
Take Away
A house has a special place in our hearts. Each of us deserves a home that reflects our hopes and dreams. With a mission to provide home loans to all sector households in urban and semi-urban India through a service based on ‘trust’ and ‘convenience,’ housing finance is a critical step towards realising this dream.
Use a loan mortgage calculator to get the best of all loan options. This tool quickly estimates your total mortgage payment, including principal and interest, and estimates for PMI, property taxes, home insurance, and HOA fees. To use a home loan calculator, enter the purchase price of a home and the amount of your down payment to calculate your estimated mortgage payment with an itemised breakdown and schedule. Adjust the loan details to fit your situation better.
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