What is the meaning of HFI ?

What is the meaning of HFI ?
HFI stands for Housing Financial Institute.
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What are the documents required at the time of application?
Each housing finance Institute has its own list of documents that one must submit at the time of application.
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How do I know that all my documents with the an application are proper?
One needs to submit the application form along with the necessary documents. On receipt of your application, the housing finance Institute will review it, ask questions wherever necessary and convey its decision to you.
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I intend to co-own, the property with my brother, sister, father, mother. Will I be eligible for a loan
Most HFIs allow only immediate relatives to co-own a property. This means that a parent-son combination and a husband-wife combination is only allowed.
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What is the maximum amount of loan that i can borrow from HFI?
The maximum amount that one can borrow depends on many factors which include the purpose of the loan, whether for purchase of property, or improvement or purchase of land for development.
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How is the amount loan of my loan eligibility decided?
The HFI looks at your earning capacity both present and future to make a judgment on your repayment capacity. Your existing obligations, your past repayment history, the quality of your earning (speculation and other non recurring income such as capital gains is normally not included in evaluating your repayment capacity) is considered. The HFI also considers your age, experience, employer and your qualifications to arrive at your repayment capacity.
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What is processing and administrative fees when they are payable?
The processing fee could range differently from HFI to HFI. Once the loan is sanctioned, an administrative fee of 1% of the loan amount sanctioned will have to be paid. It should be noted that both the processing fees and administration fees are payable upfront.
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What is the rate of interest that will be charged on my loan?
The Fixed Rate of Interest normally remains fixed over the tenure of the loan. This rate remains constant after the final disbursement has been made. It is ideally suited for situations where you expect the rates of interest to go up in the future and this fluctuation in the rates does not affect you adversely. In certain cases of Home Loans the disbursement takes place as per the stages of construction of the property i.e. the disbursement is spread out over a period of time. In such cases it is quite possible that during this period there is a possible change in the interest rate in the market. Irrespective of the fact that you are either under the fixed rate or the variable rate scheme, the new rate of interest would apply to the extent of undisbursed portion of the loan amount. The rate of interest would remain fixed at the final weighted average rate at which the loan was disbursed.
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What is monthly rest & annual rest and what is the difference between both of them?
In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month. The balance component of the EMI forms the principal paid during the month. This amount is then deducted from the opening balance of the principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of the principal for the next month. In an annual rest, the interest is calculated on your outstanding principal at the beginning of every year. Once the interest is calculated at the rate charged to you for the entire year it is deducted from the EMIs received during the year. The balance EMI is taken as principal repaid during the year. This amount is deducted from the opening balance of principal (i.e. the amt on which the interest was calculated). The balance amount is carried forward as the opening balance of principal for the next year.
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Can the Fixed Rate of Interest change during the loan repayment?
The rate of interest is a function of the quantum of loan sanctioned. Interest rates are applied as per pre-determined slab rates. Though interest rates for housing finance are not very volatile, one may well be advised to look out for indication of any rate increases or decreases to finalize the timing and amount of loan.
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Who can be co-applicants?
Most HFIs allow only immediate relatives to co-own a property. This means that a parent-son combination and a husband-wife combination is only allowed.
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Will the co-applicant's source of income be included in arriving at my eligibility?
If the co-applicant receives income from a regular source of income that has been consistent, then such income would be considered for the loan eligibility calculation. Every HFI has certain acceptable relationships of the co applicant for inclusion of income. For certain types of income, however, HFIs insist on regular Income Tax returns being filed every year on time For e.g.- for tuition income or tailoring income. If these returns are available then it will be included. Interest income, however, will not be considered for calculation of loan eligibility.
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I do not show my total earning to the income-tax will it affect my loan eligibility?
Yes your loan eligibility will be affected if you under declare your income. This is because the HFI is not in a position to establish the genuineness of the undeclared income without proper evidence. However, if the proof for such income is produced, the HFI may consider part or full income based on the nature of such cash income. Under declaration of income is not advisable as it could result in Tax implications.
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Why does the HFI need to judge my repayment capacity when it is holding my property as security?
The HFI looks at your earning capacity both present and future to make a judgment on your repayment capacity. Your existing obligations, your past repayment history, the quality of your earning (speculation and other non recurring income such as capital gains is normally not included in evaluating your repayment capacity) is considered. The HFI also considers your age, experience, employer and your qualifications to arrive at your repayment capacity.
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What is the maximum period over which I can pay the loan?
The maximum duration of period of the loan is a function of your residential status and varies for every housing Institute, and is also different for every scheme.
As a resident Indian, you could avail of a loan for duration of 5 years to 20 years. As a non-resident, you can avail of a loan only for a maximum period of 7 years.
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What is the EMI?
EMI or Equated Monthly Installments refers to the fixed sum of money that you will be paying to the housing finance Institute every month. The EMI comprises both interest and principal repayment. The size of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.
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How does the HFI arrive at the Installment to Income Ratio(IIR) Percentage?
There is a limit on the IIR that a person can afford and this calculation varies from one HFI to another. The IIR is normally fixed by the HFI on the basis of their perception of your repayment capacity every month. The parameters on which the IIR is typically based are your actual salary details, qualifications, employer / business, years of experience, growth prospects, alternate employment prospects and sources of other income, if any. The IIR is normally restricted to about 40% of your monthly gross income.
The HFIs justify this 40% with the following assumptions. About 10% of your income is spent on other loans, if you have any or if you avail of one in the future. About 25% of your income gets deducted by way of statutory deductions and for investment purposes. You also needs to spend at least 25% of your income to meet your monthly expenses. This leaves back 40%, which is taken as your repayment capacity for this loan.
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What security do I have to provide?
Security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary. Interim security may be required if the property is under construction. Collateral could be in the form of life insurance policies, the surrender value of which should be equal to the loan amount, guarantees from sound and reliable guarantors, pledge of shares and such other investments that are acceptable to the housing finance Institute.
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When can I take disbursement of the loan?
You can take disbursement of the loan after the property has been technically appraised, all legal documentation has been completed and you have invested your own contribution in full. Your contribution is the total cost of the property less the loan amount .However, in cases, where you avail of finance from a source (like PF), which generally takes a long time to get disbursed, some HFIs agree to partly disburse the loan. Yet it is necessary to put in some money towards the property at least before you avail of a part disbursement from the HFI. You also need to produce adequate evidence that you have got the source of income (sanction letter in case of a loan from PF).
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Can I repay my loan ahead of schedule?
Yes, you can pay your loan ahead of schedule. However, it must be noted that housing finance companies charge a fee for early redemption of loan. This fee can vary between 1-2% of the loan amount being prepaid.
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Do I get a tax benefit on the loan?
Yes, you are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. As the benefits could vary each year, please check out the current benefits available.
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The HFI from where I wish to avail of a loan insists on the registration of the sale agreement  However, my seller refuses to sign the agreement till he receives the money. What should I do?
Every HFI requires you to hand over the registered agreement before it disburses the loan. What you can do is show the seller the sanction letter of the HFI and pay your contribution that is due to him. Once this is done, enter into a partly paid agreement with the seller. This mentions the cost of the house and the amount paid to the seller along with the balance amount to be paid. The agreement sets a time limit for the balance payment to be made and contains a clause that the agreement would be null and void in case of a failure of payment within the stipulated time. This agreement gets registered and the disbursement is taken from the HFI. The flat purchaser has to take sufficient care to take a proper receipt for the amount paid to the seller. These receipts should cover the flat purchaser's own contribution and a receipt for the amount paid by the HFI.In many states in India, the Agreement for Sale between the builder and the purchaser is required by law to be registered. You are advised, in your own interest to lodge the Agreement for Sale at the office of the Sub-registrar appointed by the State Government under the Indian Registration Act, 1908.
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Does the property have to be insured?
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy. This is an added cost that will add to the final cost of purchase of the property.
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