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Home Loan Disbursement Process: A Step-by-Step Guide to Getting Your Loan Approved

22-Oct-2024 | Home Loan

Home Loan Disbursement Process: A Step-by-Step Guide to Getting Your Loan Approved

Buying or upgrading a home is a big decision and most people apply for a home loan to make it happen. A large percentage of the population in India relies upon home loans to turn their dream of homeownership into reality, but getting a home loan involves several steps. Home loan disbursement is one of the most important steps in that. This is the final step where the bank or the financial institution approves your loan and offer you the loan amount. The process of getting a home loan disbursed (released) seems a little complex, but don’t worry in this blog we will guide you on how home loan disbursement works in simple terms:

What is Home Loan Disbursement?

The home disbursement process is the final step in getting the amount that you need to buy your home. In this process, the bank or lender transfers the loan amount to the borrower. This only happens once you have completed all the paperwork and meet the eligibility criteria for home loan set by the financial institution.

Steps in Home Loan Disbursement Process

Let’s understand the steps that are involved in home loan disbursement process:

Loan Application Submission

Applying for home loan is the first step to getting a home loan. It is a part of what you need to do:

  1. Fill out the loan application form: This process involves basic information like your name, income, job, and the property that you are buying.

  2. Submit required documents: You will need to provide some basic documents like ID, income proof, bank statements, and property papers.

  3. Check your credit Score: A good credit score can lead to getting your loan approved fast. Lenders use this score to check how likely you are to repay the loan. You can also check your credit score for free using online tools.

Loan Sanction

After reviewing your loan application and documents, the lender will decide whether to approve or reject the loan application, If they approve it:

  1. Loan Offer: The lender will issue a sanction letter, which has information like loan amount, loan tenure, interest rate, monthly repayment amount, and also the terms and conditions.

  2. Accept the Offer: After agreeing to the terms and conditions, you have to sign and return the letter.

Legal and Technical Verification

The lender needs to ensure that the property you are buying is legal and worth the amount that you are paying before disbursing the loan.

  1. Legal Check: The bank appoints a lawyer to verify that the property has clear ownership and there are no legal disputes.

  2. Technical Check: The property is inspected by a technical expert or a property valuer to ensure that it is worth the price that you are paying and is in good condition. 

Down Payment

A down payment is the portion of the property’s cost that you pay upfront, typically around 20-30%% of the property's value. The bank provides the remaining percentage to the borrower.

Loan Agreement

When your property is reviewed and you pay the down payment, you sign a loan agreement with the lender or the financial institution. In this contract, there are various details, such as:

  1. How much the loan is?

  2. What will be the interest rate?

  3. What is your loan tenure?

  4. How much your monthly EMI will be?

Loan Disbursement

Now the bank transfers the loan amount, the way this happens depends on which kind of house you are buying like a ready-to-move-in house or under construction house. If you are buying a fully constructed house, the lender will provide the entire money at once. On the other hand, if you are buying an under-construction house, the lender will provide the loan amount in parts called disbursement in tranches which is given according to the construction progresses.

Start Paying EMIs

After the loan money is disbursed, you will start repaying it through EMIs (monthly payments). EMI includes a part of the loan amount and interest. By using a tool like a home loan EMI calculator, you know how much you need to pay every month.

Repaying the loan

Over time, you will keep paying your monthly EMIs until the entire loan is paid back. Ensure that you pay your payments on time to avoid extra charges or damaging your credit score.

What Can Affect the Loan Disbursement?

  • Good Credit Score: Your loan approval depends upon how good your credit score is. The better your credit score, the faster is the loan approval.

  • Steady Income: The lender will approve your loan application easily when you have a stable income.

  • Property Documents: Ensure that all the property-related documents are correct and complete.

  • Down Payment: Ensure the down payment is readily available when needed.

Conclusion

Home loan disbursement plays an important role when buying a home. It happens once the lender reviews that everything is okay with your documents and the property. By following these steps, you can get your loan without any trouble. Using a tool like a home loan EMI calculator and keeping a good credit score can make things easier.

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