All you need to know about Home Loan Disbursement Process in India

Be it buying a flat in an upmarket locality or building your own house on a piece of land, living in a self-owned property is probably the primary aspiration of almost all Indian families. Consequently, home loans have become quite popular when it comes to financing such aspirations. In light of this increasing popularity of home loans, the finance industry is brimming with individual lenders, banks, and NBFCs, which strive to provide you with the best loan product. 

These lenders provide lucrative home loan interest rates, along with flexible tenures and speedy disbursements. Although the exact disbursal process may vary depending upon the lender chosen, the overall stages of the process are uniform across all vendors. 

Let us have a look at the standard home loan disbursement process in India.

Step 1. Pre-application

The pre-application period usually consists of conducting thorough market research to narrow down on lenders which offer the most favorable loans in terms of interest rates and tenures. Also, it involves answering questions like:

• How much down payment can you pay upfront?
• What will be the size of the EMI (equated monthly instalments)?
• What is the total loan amount you’d require?
• Do you qualify for a home loan?

Also, you need to have booked the apartment/house that you’re looking to buy. Once you’ve narrowed down to the lender of your choice to obtain loan from, it’s best to visit the branch and assess your eligibility.

Step 2. Documentation and paperwork

This step is easily the most feared stage in the home loan disbursement process, given how cumbersome it can get. Home loan applications typically involve a lengthy document verification process, which requires documents like:

• The loan application form
• Compliance documents: Tax returns, form 16, and annual income computations
• Age proof: 
• Address proof: Passport, Driver’s License, AADHAR card, any other document specifying your address
• Income proof: Salary slips, bank statements, and business income details.
• Employment details: Employer acknowledgement letter, business details, and information regarding notable customers
• Property documents: Cost estimate, NOC, property agreement, allotment letter, and builder’s bank details.

Step 3. Other protocols

Aside from the documentation process, the lender will also require a home loan processing fee. The typical range of processing fee for home loan lies somewhere between 0.25% to 0.5% of the total loan amount. Other formalities include

• Personal Interaction
• Information verification
• Credit assessment

Step 4. Sanction

The next step is loan sanction, which comes in the form of a sanction letter stipulating the loan amount, rate of interest, tenure, and other terms and conditions. It generally takes lenders 3-4 weeks to issue the sanction letter post-approval. To accept the offer, you must intimate your acceptance to the lender, which is generally done by providing an attested duplicate copy of the offer/sanction letter.

After the loan gets sanctioned, and the money is transferred, the EMI schedule is commenced, of which you’ll have to ensure timely repayments.