A Step By Step Guide on Home Loan Disbursal Process

When a home is purchased by a person, and one has to secure a home loan in order to finance it, it is a big step. The rate at which a Home Loan disbursement takes place is important since it determines when the lender will give out the money and how. Many borrowers are unaware of the different Home Loan disbursement stages, which can lead to confusion and delays.

This guide will break down every step of the loan disbursement process, ensuring you have complete clarity before you apply.

Also Read: Home Loan: All You Need to Know – Godrej Capital

Step: 1. Loan Application and Approval

The first step in the housing loan disbursement process is applying for the loan. This involves:

• Submitting an application to the lender with personal and financial details.
• Providing documents such as:
  • Identity and address proof
  • Income proof (salary slips, bank statements, tax returns)
  • Property-related documents
  • Credit score report

Once these documents are submitted, the lender will review them to determine your eligibility. This is where a loan disbursement process in banks or financial institutions differs—some may process applications faster, while others may take longer.

After verification, if you meet the lender’s criteria, you will receive a sanction letter containing the following details:

• The approved loan amount
• The interest rate
• The loan tenure
• Terms and conditions

This, being a crucial document, must be sorted out to indicate approval of the loan before the disbursement of funds is processed.

Step: 2. Property Verification and Loan Agreement

Before releasing any funds, the lender will verify the property details. The lender’s legal team will check:

• The property’s legal status to ensure there are no disputes.
• The builder’s credibility (for under-construction properties).
• The ownership documents to confirm the seller’s legitimacy.

Once you have completed these checks, you should sign the agreement for a loan. This will legally tie you to the terms of the loan and indicate your concurrence with the repayment timeframe, rate of interest and repayment period.

Step: 3. Understanding the Down Payment

A down payment is the portion of the home’s cost that you need to pay upfront. The lender does not cover the entire cost of the property. The down payment meaning is simple — it’s your financial contribution towards the purchase.

How Much Do You Need to Pay?

• If the property value is up to INR 30 lakh, the lender can fund up to 90% of the amount. You need to pay at least 10%.
• For properties between INR 30 lakh and INR 75 lakh, the lender funds up to 80%, requiring a 20% down payment.
• For properties above INR 75 lakh, you must arrange at least 25% as a Home Loan down payment.
• For example, if you are buying a house worth INR 50 lakh, you must arrange at least INR 10 lakh as the down payment on a house.
• A higher Home Loan down payment means lower EMIs and interest payments. If possible, contributing a larger sum upfront can reduce the overall loan burden.

Step: 4. Loan Disbursement Process and Stages

Once all documents are verified and the down payment is made, the lender will begin the loan disbursement process. This process depends on whether the property is ready to move in or under construction.

Disbursement for Ready Properties

In ready-to-move-in houses, the lender hands in the full loan at once and directly to the seller or builder as per the terms agreed on.

Disbursement for Under-Construction Properties

For properties under construction, the housing loan disbursement stages happen in phases. Funds are released in instalments based on the progress of the construction. This is called part-disbursement and ensures that funds are used appropriately.

Once certain construction milestones are completed, payment is usually made when the builder sends a formal request to the lender, and the lender then releases funds.

Factors That Can Delay the Disbursement Process

While the home loan disbursement process is straightforward, delays can occur due to:

• Incomplete documentation – Missing paperwork is a common issue.
• Legal disputes – If the property has any legal issues, the lender may delay disbursement.
• Credit score problems – A poor credit score can affect final approval.
• Builder’s credibility – If the builder has a bad financial history, the lender may hesitate to release funds.

Also Read: What does New Tax Regime Say About Home Loan Tax Benefit?\

The Bottom Line

Understanding the Home Loan disbursement process is crucial for a stress-free home purchase. From applying for a loan to making the down payment, every step requires planning and preparation.

By ensuring all documentation is in order and choosing a reputable lender, you can speed up the loan disbursement process and move into your dream home sooner.

Apply now for a home loan to get started on your journey to homeownership!

If you want to calculate your monthly EMIs accurately without putting in a lot of mental labour, use an online EMI calculator. This will definitely make calculating EMIs a cakewalk for you.

FAQs

Q.1. What is the next step after loan disbursement?

A. After the loan disbursement process, the next stage is to repay the loan amount monthly. This is critical to your financial health and credit score.

Q.2. Can a loan be cancelled after disbursement?

A. Once a loan has been disbursed, cancelling it is difficult but possible in certain situations. The process depends on the lender's policies and the stage at which cancellation is requested. You will be charged a fee and will have to return the entire loan amount to the lender as well.

Q.3. How can I track my loan disbursement?

A. Yes, you can track your loan disbursement online through your lender's website.

Q.4. What are the methods of loan disbursement?

A. The lender directly credits the approved loan amount into your bank account through a direct deposit. The other method is the amount being disbursed to your account through a cheque.

Q.5. How long does it take for a loan disbursement process?

A. It normally takes a few hours to a few days for you to receive loan funds. This time frame is determined by various factors, like the completeness of the documents you provide and how the lending institution verifies your details.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com