The process of buying a home on mortgage is straightforward in most counties. In Pakistan, this process is made unnecessarily complicated by the local banking institutions and mortgage agents. This is one of the reasons why many homebuyers become confused and do not proceed with their application.
Thankfully, the government of Pakistan and State Bank are trying to streamline this process, in this blog, we share an overview of the process, so that you are aware and know what to expect when pursuing funding for your home.
Initial Application Stage
The initial application stage involves submitting your mortgage application. At this stage, most mortgage banking institutes in Pakistan (Trellis included) ask for your basic information. This includes your name, contact information, current address, income status and a rough estimate of your monthly earnings and expenditure.
The bank will also ask for information related to the amount of funding you need and price of the property that you are looking to buy. If you have co-borrowers on the application, you will be required to submit their names, contact details and monthly incomes as well.
The Document Submission Stage
After you have provided all your information, the banking institute will ask for relevant documents pertaining to your application. These documents will be used later to verify the information that you provided to the bank.
Keep in mind that the mortgage financing institute will only ask you for relevant documents.
Documents required for funding can be divided into two major categories. First, documents related to your income verification are called credit checks. Second, documents related to property verification are called collateral checks.
We won’t go into details of these documents. For simplicity’s sake, just know that these documents prove that you, as the borrower, are earning the income that you claim to earn. They are also used to assess whether you will be able to meet the monthly mortgage servicing obligations.
Typical examples of credit check documents include those related to your earning and expenses.
For example, suppose you are a salaried employee looking to avail home financing. As proof of monthly income, you can offer details of your employment by submitting your monthly salary slips or employment contract. You can also give evidence of income by submitting your bank statement that shows salary being deposited into your account.
Similarly, if you are a self-employed business running a store or shop, you can provide proof of your monthly income with the sales register, monthly invoices to your customers, or bank statements showing money coming into your bank.
Keep in mind that these proofs of evidence that you submit at this stage will be verified by the home mortgage institute. In most cases, banks use a third-party organization to verify your income status.
Collateral check documents are those that relate to the property. These include the property’s title documents, leasing and subleasing documents, building control authority registration and various other NOCs.
Unfortunately, there are a lot of fraudulent activities in Pakistan’s land registry records. These include problems such as file doubling, fake deeds, illegal land encroachment or unapproved construction.
Your financing bank or institute will want to make sure that there are no issues of irregularity in the property before they advance any funding. The process can take a while to complete. However, it is best to get this right. Proper verification of the property not only protects your mortgage company, but also ensures that you are buying a property that is legit.
If you are getting finances to buy a property, you will not be required to provide property documentation. Your funding bank will get in touch with the seller (or construction company) and get the necessary documents from them. They will then proceed to have them verified through a third-party to ensure that everything is in order.
Other Documents and Disclosures
Apart from the credit and collateral checks, your mortgage financing institute will also require some other information to process your application. These include details of your recent residence, dependents, and obligatory payments etc.
If you have declared bankruptcy in the past, or have been unable to pay your obligations recently, you will need to disclose this information as well. If you hide any relevant information that can adversely affect your application, and the financing institute discovers this information during the review stage, they are very likely to reject your application.
The best course of action is to provide as much detailed information as you can. A good home financing institution in Pakistan will try to help and guide you in the right direction. However, they cannot help you if you omit or miss any information in the application submission stage.
Once all your documents have been checked and verified through a professional firm, you will be made an offer by your mortgaging institute. You will be required to pay any additional closing fees to start the process.
Once everything is in order, your mortgaging bank will provide the funding to the seller or developer, and you will get possession of your new home. You will be required to make periodic payments to the mortgage bank for the agreed period of time.
There you have it. The home mortgage process is not as complicated as some make it out to be. The only issue is that the industry is in its early stages in Pakistan. A lot of homebuyers are not aware of the process. Even banking staff is learning the ropes, so it can seem intimidating.
We hope this guide on getting a home mortgage in Pakistan can be useful for you. If you have questions or concerns, please feel free to get in touch or call us at 0309 2228435.