Home Loan Disbursement Process

When one decides to purchase a home, they do it when they are financially ready and know that they can finance the purchase. This purchase isn’t fully possible with the available amount, which is why people consider taking home loans to buy a home. These home loans are offered after following a long home loan disbursement process, which is usually known to get quickly done with the home loan process. This article discusses the thorough procedure of a home loan disbursement process, which can be considered by anyone thinking of purchasing a new home.

What is Home Loan Disbursement?

A home loan disbursement process is the last stage of taking a home loan. To understand the full process, one needs to know the home loan process flow chart given in the following breakdown. 

• The process starts with applying for a home loan to the lender. 
• The lender checks your eligibility criteria, asks for some essential documentation for verification, and checks them. 
• After necessary checks, if one meets the lender’s eligibility criteria, the loan gets disbursed to the borrower’s account. 
• This disbursement can be done fully or partially, which means either the lender can send the complete amount all at once in your bank account or they may send the amount in parts.

How Does it Work?

Knowing the home loan disbursement process and how it works is essential before taking a home loan. This is because it helps one know every detail of their loan and saves them from any fraud that might happen. The following breakdown explains how the home loan disbursement  process works:

• The disbursement of the loan depends upon the stage of construction of the loan. 
• If the home is fully constructed the complete amount gets disbursed in the borrower’s account. 
• However, if the construction process has just been started or it is in the middle of construction, the loan gets partially disbursed. This means only part of the loan amount gets credited to the borrower’s bank account, and the remaining amount keeps getting disbursed after the process is completed. 
• These loans can be acquired for the purchase of a newly constructed home, purchase of a plot, construction of a house, etc. 

Stages of a Home Loan Disbursement Process

Understanding the process of home loan disbursement stages is important because that helps one experience a smooth loan journey. This includes:

Stage 1: Applying for the Loan

The process of Home loan starts with researching various lenders that are offering these loans. Check their terms and conditions, interest rates, and repayment periods and see what matches your requirements. Choose the one that matches and provide information to that lender about your income, investment and property. 

Here, salaried individuals need to submit documents such as:

• Proof of identity
• Proof of address (Residential address)
• Office address
• Passport-size photo, form 16, etc. 

Whereas self-employed individuals need to submit documents such as:

• Balance sheets
• Profit & loss statement
• Documents mentioning business address, etc. 

Stage 2: Sanctioning of the Loan

From the various home loan process steps, this step is the second step of the process. 

• After applying for a home loan with the necessary documentation, the lender would like to verify the property, its location and other essential details. 
• For this, the legal experts will do a legal and technical examination of the property to check the construction quality and the location of the property. 
• Apart from this, the legal department will check the NOC and the sales deed of the property to ensure the genuineness of the borrower. 
• After this, the borrower receives the disbursement letter, which confirms the sanction of a home loan. 
• The letter might include details such as loan amount, interest rate, tenure of repayment, etc. 

Stage 3: Disbursement of Loan

This stage of the home loan process is the last stage where the borrower needs to make a down payment and provide property documents to the bank officer. 

• The disbursement of a loan occurs when the borrower provides the lender with the receipt of payment received from the builder. 
• After this, the loan amount gets disbursed based on the stage of construction your property is at. 
• If the property is partially constructed, only some part of the loan is disbursed, and if fully constructed, then the full amount is disbursed. 
• Once the disbursal is done, the interest will be charged based on the pre-construction or full construction. 
• If the home is in the pre-construction stage, only interest needs to be paid; if fully constructed, the EMI will include both principal and interest.

Eligibility Criteria for Home Loan

The eligibility criteria for the home loan are quite straightforward, which include: 

• Age: The applicant of the loan must be aged 18 to 65 years old. This is because an 18-65-year-old person is assumed to be capable of repaying the loan.
• Income: Home loan eligibility requires reliable income to be cleared first for home loan disbursement time after approval. A person must have a stable income to apply for a loan. 
• Credit Score: This score should be above 750 because that shows a person is capable of repaying a loan and has a decent credit history.

Conclusion

A home loan disbursement process is a straightforward process if understood properly in the first go. The process includes the application for a home loan to a lender after researching various lenders. After this, the borrower’s loan gets sanctioned based on the necessary checks done by the legal authorities. Finally, the concerned authority provides a home loan disbursement letter, and the amount gets disbursed in the bank account of the borrower after getting approval from the concerned authorities.