Home Loan Disbursement Process Explained in Detail
When you look for the options to fund your dream of owning a house, applying for a home loan seems to be the best alternative. Home Loan comes at a lower rate of interest and long repayment tenure than other lending options.
Nowadays, home loans are being offered at low interest rates. It’s the best time to buy your dream house with a housing loan. However, acquiring a home loan takes significant time as it consists of a long process that involves application, documents submission, verification of documents and property, approval, and disbursal.
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If you are unaware of the home loan disbursement process, below we have explained it in detail for you:
What is the Disbursement of Home Loan?
The home loan disbursement process mainly involves three stages, viz. the submission of the application form and documents, sanctioning of loan, and the disbursement of loan amount mentioned in the home loan disbursement letter. This disbursement letter also mentions your home loan disbursement schedule in detail.
It is advised to use a home loan eligibility calculator to understand the amount you are eligible for and also a Home Loan EMI Calculator to know the amount you have to repay to the lender every month.
If you can afford the EMI, you can easily apply for a home loan. Once the lender has approved your home loan application and you have signed the sanction letter, the disbursement process will start.
What are the Various Home Loan Disbursement Stages?
The process to get a home loan in India involves the following steps:
1. Filling Out the Home Loan Application Form
The first step in the process of availing of a home loan is to fill out the home loan application form wherein you have to mention your personal details and also the details about your income, employment, existing liabilities, property, and so on. Earlier, you had to visit the bank and fill a long application in a paper format, but today, you can do it online as well as offline.
2. Submission of Application & Required Documents
After filling out the home loan application, attach the home loan documents required by the lender, and submit them to the lender.
Some common home loan documents (self-attested) include:
- Identity proof: PAN Card, Aadhar Card, Passport, Driving License, etc.
- Address proof: Aadhar Card, Driving License, Passport, Utility Bills, etc.
- Age proof: Aadhaar Card, Passport, Birth Certificate, 10th Certificate, PAN Card, etc.
- Educational qualifications proof
- Income proof: Bank Statements, Salary Slips, Income Tax Return, etc.
- Business proof: Balance Sheet, Profit & Loss Statements, Proof of Business Address, Business License, etc.
- Property documents: An approved copy of the building plan, estimated cost of house purchase/construction, NOC from society/builder, etc.
Besides the documents mentioned above, your lender may also ask for more or less.
3. Payment of Home Loan Processing Fees
After submitting the home loan application form and required documents, you might have to submit a processing fee (as required by the lender). The home loan processing fee is a non-refundable levy that varies from lender to another.
This fee is levied by the lender to begin the home loan process and maintain the home loan account of the applicant. It usually varies from 0.50% and 2% of the sanctioned loan amount. However, there are some lenders who do not charge any processing fees or waive off this fee on certain occasions. Some lenders also keep a minimum or/and maximum limit on the amount of processing fee.
4. Discussion with the Lender
After submitting the application form & documents, the applicant has to wait until further notification by the lender. Within this waiting period, the lender verifies your details and decides the amount for which you are eligible based on your repayment capacity.
During this period, the lender can also ask you to pay a visit (or may visit you themselves) for a face-to-face interaction before sanctioning the loan. This is done to gather more information about the borrower and assess their repayment capacity.
The next step is verification of the documents submitted and other details of the borrower to validate the information provided by them in the home loan application. Representatives of the bank may even visit your home or workplace for verification. This process also involves your scrutinizing your credit score and credit report from credit bureaus like CIBIL, Experian, CRIF High Mark, and Equifax.
If the given documents and information are all in order and correct, this process is usually quick.
6. Home Loan Approval
After successfully completing the steps mentioned above, the lender will provide you the home loan approval or sanction letter, which includes the following details:
- Sanctioned amount of loan
- Applicable interest rate
- Type of rate of interest (Fixed, Variable, or Hybrid)
- Repayment tenure
- Mode of repayment
- Special scheme (if any)
- Terms & conditions, and policies of home loan
After receiving the sanction letter, you have to sign and submit an acceptance copy (a duplicate copy of the sanction letter) to the lender, if you are satisfied and agree with the content of the letter. At this stage, you will need to pay administrative fees (if any) to the lender.
It is advised to read all details mentioned in the sanction letter carefully before signing it.
7. Property Verification & Legal Scrutiny
Before loan disbursement, the lender will verify the property to be purchased or constructed. You will need to submit original copies of your property’s title deed, no objection certificate (NOC), encumbrance certificate, and other documents as required by the lender.
After that, the lender will conduct a legal check on the property to ascertain that its title is clear and it is indisputable. The lender will also conduct the technical valuation of your property. A representative of the lending institution will visit the property for inspection.
For under-construction property, the lender will scrutinize the property’s location, the stage, quality, and progress of the construction. In case of ready to be sold or re-sold property, the lender scrutinizes its age, ownership, maintenance, locality, legal clearances, and the quality of construction.
8. Disbursal of Home Loan
After the above steps successfully are completed, the lender will provide you the final agreement and will disburse the home loan amount as per the mutually agreed terms.
Note: The steps mentioned above may differ according to the lender’s preference.
Check Home Loan Disbursement with All Banks
The home loan disbursement process varies from bank to bank. Here are the home loan disbursement processes of five leading banks:
1. HDFC Home Loan Disbursement
Below is the home loan disbursement process of HDFC:
- Ascertainment of the value of the property.
- Completion of the documentation process.
- Down payment to be made by the home loan borrower.
- Request for HDFC Home Loan disbursement to be made by the borrower, either online or offline.
- For offline request, you need to visit the bank’s branch office. For online disbursement request, you can visit the official website of the bank, log in with the user ID, and request for the loan amount disbursement.
- The loan will be disbursed by the bank either in a single instalment or through multiple instalments, as per the terms and conditions of the loan.
- In the case of multiple instalments, the bank may require you to pay ‘pre-EMI’ interest until the full disbursement, after which the EMI starts.
2. ICICI Bank Home Loan Disbursement
The Home loan disbursement process of ICICI Bank involves the following steps:
- Submission of the ICICI Bank Home Loan application and relevant documents (KYC, income, & property documents).
- Verification of all the property-related documents.
- Property valuation by the bank and sanction of property valuation letter.
- E-stamping of the sales agreement and construction agreement.
- Disbursement of the home loan amount.
3. SBI Home Loan Disbursement
The State Bank of India or SBI follows the following home loan disbursement process:
- Submission of all the relevant documents along with the application to the bank authorities.
- Then a mortgage has to be made in favor of the bank.
- If the creation of a mortgage is hindered due to any valid reason, the bank will require security (including a third party guarantee) for a short period.
- Finally, the SBI Home Loan amount is disbursed in a single instalment or through multiple instalments, as per the terms & conditions of the particular home loan.
4. Axis Bank Home Loan Disbursement
Axis Bank’s home loan disbursement process includes the following steps:
- Submission of relevant documents, including income & property documents required to Apply for a Axis Bank Home Loan.
- Documents verification and property valuation by the bank authorities to check the eligibility of the borrower.
- Home loan disbursement after the bank is satisfied by submitted documents.
5. DHFL Home Loan Disbursement
- Assessment of DHFL Home Loan Eligibility through income verification and credit report analysis.
- Then the bank concludes the amount to be approved in the form of a loan.
- If there is no problem in income verification and credit checks, the bank will provide conditional sanction for your home loan in which a formal Letter of Offer cum acceptance will be issued favouring all the loan applicants.
- A technical assessment of the property to be purchased or constructed will be conducted by a technical office.
- Legal assessment will be done by a lawyer to examine the property and authenticity of documents.
- Disbursement of the home loan amount is done after verification and valuation.
✅ How long does it take to disburse a home loan?
There is no particular fixed time required for home loan disbursement. However, it might take around 7 days to up to 4 weeks, depending on various factors (such as the authenticity of documents, property type, employer type, location, builder type, etc.).
✅ What are the key steps of the home loan disbursement process?
The process of home loan disbursement mainly involves the following steps:
- Submission of documents
- Legal verification of documents
- Down payment
- Verification of property & documents
- Home loan disbursement
✅ How does the bank disburse the home loan amount?
The bank may disburse the home loan amount ether in a single instalment (full) or multiple instalments amount (in parts) according to requirement and terms & conditions agreed upon. For partial disbursement, you may need to pay interest as ‘pre-EMI’ until the full amount is disbursed. EMI payment starts after that.
✅ Can I cancel my home loan after disbursement?
No, you cannot cancel a loan once it is disbursed. It can only be cancelled prior to the disbursement of the loan amount.
✅ What does disbursement mean?
Disbursement means paying out money. For instance, disbursements paid out to purchase a house, run a business, cash expenditures, dividend payments, etc.
✅ What does full disbursement mean?
For under-construction property, the lender disburses a home loan depending on the stage of construction of the residential property. However, in case of ready or resale property, the loan amount is disbursed in full, which is called full or complete disbursement or payment via cheque.
✅ What does partial disbursement mean?
For under-construction property, the bank usually makes loan payment in parts, which is known as partial or part disbursement. The lender will not commence the EMI right away. Since the EMI is computed on the entire loan amount, the repayment dues on partial disbursement may not be applicable at the start of the loan tenure. For this, many lenders levy interest on the loan amount partly disbursed.
✅ How does the lender determine the applicant’s loan borrowing capacity?
Banks determine an applicant’s loan borrowing capacity based on several factors, such as applicant’s ages, income, existing liabilities (including EMIs of other loans, if any), Fixed Obligation to Income Ratio (FOIR), and so on.
Now that you are aware of the home loan disbursement process, applying for a home loan and obtaining the loan amount will be much easier for you.
For all housing finance solutions, you can get in touch with our Mortgage Experts right now.
Also Read: Top Home Loan Festival Offers for 2020
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