Homeownership is a dream for many individuals, and a home loan can help make that dream a reality. But the loan disbursement process can be confusing and overwhelming, especially for people who are buying a home for the first time.
Whether you’re a first-time buyer or simply looking to refinance, this guide will walk you through the process and help you understand the ins and outs of home loan disbursement.
What is home loan disbursement?
The disbursement of a home loan refers to the transfer of funds from the lender to the borrower’s account. It is the final step in the home loan process after the loan application has been approved and the loan agreement has been signed by both parties.
During the disbursement process, the lender will check the submitted documents and make sure that all of the loan agreement’s terms and conditions have been met. Once the verification is complete, the loan amount will be transferred to the borrower’s account. The terms and conditions of the loan will be written in the disbursement letter, as well as the amount of the loan and when it will be paid out.
What are the various stages of home loan disbursement?
The process of getting a home loan in India involves several stages, starting from filling out the home loan application form to disbursal of the loan. The following are the various home loan disbursement stages in detail:
1. Completing the home loan application form
The first step in obtaining a home loan in India is to fill out the home loan application form. On this form, you will need to give information about yourself, such as your name, address, income, employment, existing debts, properties, and so on.
2. Submitting application and required documents
After filling out the home loan application form, you will need to upload the required home loan documents and send them to the lender. Some of the common home loan documents that are required include:
● Identity proof such as a PAN Card, Aadhar Card, Passport, or Driving License
● Address proof such as an Aadhar Card, Driving License, Passport, or Utility Bills
● Age proof such as an Aadhaar Card, Passport, Birth Certificate, 10th Certificate, or PAN Card
● Educational qualifications proof
● Income proof such as Bank Statements, Salary Slips, or Income Tax Returns
● Business proof such as Balance Sheet, Profit & Loss Statements
● Proof of Business Address, or Business License
You may also be asked to show documents about the property, like an approved copy of the building plan, an estimate of how much it will cost to buy or build a house, and a NOC from the society or builder. Note that the lender may ask for additional documents or fewer documents, depending on the specific case.
3. Paying the home loan processing fees
Once you’ve filled out the home loan application form and sent in the necessary documents, the lender may ask you to pay a processing fee. This is a one-time fee that the lender will charge you to set up and keep your housing loan account.
It typically ranges from 0.50% to 2% of the sanctioned loan amount, but this can vary from lender to lender.
4. Communication with the lender
After you send in the home loan application form, the lender will check your information and decide how much you can borrow based on your ability to pay it back. The lender may also contact you to gather more information about you and assess your repayment capacity. This process also involves checking your credit score and credit report from credit bureaus such as CIBIL, Experian, CRIF High Mark, and Equifax.
5. Loan approval
After the verification process goes well, the lender will give you a home loan approval letter or a sanction letter. This letter will have information like the amount of the loan that has been approved, the interest rate, the type of interest rate (fixed, variable, or hybrid), the length of time it will take to pay back the loan, how it will be paid back, any special programs that may apply, and the loan’s terms and conditions.
Once you receive the sanction letter, you will have to sign it and submit an acceptance copy of it to the lender if you agree with its contents. At this stage, you may also need to pay any administrative fees to the lender.
6. Property evaluation and legal review
Before giving money for a purchase or building project, lenders often do some kind of inspection of the place where the deal will happen. This means giving the lender original copies of the title deed, a no objection certificate (NOC), an encumbrance certificate, and any other documents they need.
The lender will then do a legal check on the property to make sure that the title is clear and undisputed. For properties that are still being built, the lender will also look at the location, quality, stage of construction, and progress of the building. When a property is ready to be sold or is being resold, the lender will look at its age, ownership, maintenance, location, legal clearances, and construction quality.
7. Loan disbursement
Once all of the above is completed, the lender will issue a formal agreement and disburse the home loan proceeds per the agreed-upon conditions. The money is put into the borrower’s account or sent to the builder’s or seller’s account.
Conclusion
The process of disbursing a home loan may be a perplexing procedure, but with the appropriate assistance, it is possible to make the process simpler.
If you’re in need of assistance for making any payments to developers, HomeCapital provides interest-free financial support to home buyers for down payments, payments on possession, stamp duty payments, and all other property payments to developers. With the help of HomeCapital, you can be sure that when you buy your dream home, you are making a smart financial choice.