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The Ins & Outs of The Home Loan Disbursal Process

Submitted by admin on August 26th, 2024

Many middle-class families aspire to own and live in their dream home. The idea of a dream home varies from person to person, as some prefer flats, others row houses, and yet others like to purchase their own plot and build a custom home.

Irrespective of the type of home one prefers, one fact remains the same. Buying or building one’s dream home is a long, expensive, and tiring process. This is because every aspect must be perfect and fulfil the family’s every need.

Hence, finding/building a home that is within one’s budget in a desired location is an expensive affair. For a vast majority of the middle-class homebuyers, buying/building their dream home is extremely difficult without availing a home loan.

If you are considering availing a home loan, read on to discover the home loan disbursement process.

Home loan disbursement process

When people think about applying for a home loan, they first think about the extensive formalities and how long it will take for them to receive their desired funds.

Listed below is the entire home loan disbursement process:

There are 3 stages in the home loan disbursement process, which are:

• Application
• Sanction
• Disbursement

Home loan application

Home loan application begins with filling a form which is similar to a KYC form. Apart from their basic information, in this form, applicants must provide details pertaining to their income, investments, and property. They may have to provide documents such as:

• Age proof
• Identity proof of applicant and co-applicant
• Passport size photos of all applicants
• Address proof
• Office address proof
• Salary slips of last 3 months
• Bank statements of last six months
• Income tax returns of past 2-3 years
• Form 16
• Investment details of insurance, FD, and stocks if applicable

Applicants who are self-employed or business owners must provide complete details of their monthly income, turnover, and tax returns. Hence, they need to attach documents such as:

• Passport size photos of all applicants
• Identity proof of applicant and co-applicant
• Business office address proof
• Address proof
• Age proof
• Evaluated turnover details
• Balance sheets of past six months
• Loss and profit assessment documents
• Income tax returns
• Owner and business’s VAT/Service tax/GST returns
• Advance tax payment receipts
• Complete documents of property to be purchased

Home loan sanction

Once completed, the bank or lender will carefully examine the application. Next, their lawyers/legal experts and verify property details.

They examine the property site to evaluate the property’s location and actual value through its construction quality, they will authenticate your documents such as:

• No objection certificate
• Sales deed
• Contribution receipt

After verification is accomplished, applicants receive a home loan disbursement letter containing the loan sanction status. At this stage, any additional documents needed or incomplete documents as are also requested.

Home loan disbursement

After home loan disbursement is approved, the bank/borrower sends a sanction letter stating details like disbursed amount, interest rates, loan tenure, instalment dates, and validity of allotment letter.

Once they receive the sanction letter, borrowers must provide the bank officer with the down payment or own contribution receipt. Then, the lender/bank reminds the borrower of the first instalment rate.

Prior to the actual disbursement process documents like agreement copy, allotment/sanction, credit facility receipt, and encumbrance certificate. Next, the property value is assessed.

Finally, the loan amount is disbursed. However, the interest rate may be different from that mentioned in the sanction letter, as this rate is determined depending on the actual disbursement date. When this is the case, a revised sanction letter is also issued.

Depending on a borrower’s credit score, banks/lenders will disburse the entire loan amount together or as instalments.