Understanding Home Loan Sanctioning and Disbursement Process

Home Loan is a buzz word for property buyers, real estate experts and investors. Before you apply for home loan you need to conduct some market research and choose lending company that offers best deal for buying your dream home or property. If the dream property is out of your budget now, consider a smaller property in the same area or moving into a cheaper locality. Once you have an idea about your eligibility and have selected the property, the next step is to apply for the home loan.

Home Loan involves three important process or steps. First process or step for home loan is submitting duly filed application form along with necessary documents. Second and third processes – Sanction and Disbursement – are the two main steps for availing a home loan.

Sanction of Home Loan

Based on various parameters and documents submitted, bank will evaluate the loan application. The bank checks all your information including your existing residential address, your place of employment, employer credentials, residence and work telephone numbers. Representatives are sent to your workplace or residence to verify the details. If the bank is not convinced about your credentials, your application may get rejected. If it is satisfied, it sanctions your loan. Once the loan is sanctioned, the banks sends you an offer letter mentioning the details of your Home Loan such as Loan amount, Tenure of the loan, General terms and conditions of the loan, Rate of Interest  etc. If you agree with what is mentioned in the offer letter from the bank, you will have to sign a duplicate letter of the same for the bank’s records.

Disbursement of Home Loan

An innovative financial institution may offer a more suitable loan package that suits your needs. Besides, their application process may be faster and hassle-free. Once you have identified the property that you want to buy, applied for Home Loan and your Home Loan is sanctioned, you will get an offer letter which you need to sign and submit back to your bank for the bank’s records. Following are important process or steps involved in the disbursement of Home Loan.

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• Documents for the disbursement: Once you have submitted  a duly signed duplicate letter of offer letter to the bank, based on the nature of the transaction (purchase from builder / resale etc.), the officer will inform you of the required property documents for the disbursement of the loan.

• Lawyer’s report on Documents: Your documents relating to property such as Sale deed, No Objection Certificate, Own Contribution Receipt, etc. would be examined by an expert or lawyer.  The lawyer’s report either gives a go-ahead if documents are clear, or it may ask for a further set of documents.

• Date and amount for down payment: Once bank or your financial institute receives advice from its lawyer that the legal process has been completed and the loan documents are in order, the officer will inform you the date and amount of the first installment or down payment you have to make.

• Transaction documents: In addition to the property documents, you will be required to execute transaction documents including the Credit Facility Application Form and other documents required for disbursement of the facility.

• Disbursement of Home Loan: The amount sanctioned is disbursed in one or more installments subject to legal & technical verification of the property and other terms and conditions mentioned in the sanction letter.

Every bank conducts a legal check on your documents to validate their authenticity. Banks are extremely careful about the property they plan to finance. As a buyer, it gives you confidence that your property has been inspected by experts and that you are buying an asset that is legally clear and technically sound.

Sometimes the bank may ask you to pay for the legal verification. However, most banks cover the costs in the upfront (processing) fee that you pay. Once all the above mentioned process, the borrower is entitled to take the money from the lender party. The EMI payments commences only after the entire sanctioned loan amount is drawn. Until such time, the customer is supposed to pay a simple interest

It is extremely important to take insurance coverage when you purchase a house. A Loan Officer can provide invaluable assistance, and clarify issues which you are unsure. It is recommended to contact as many banks or lending company as possible before you sign agreement for your Home Loan. Take the time to discuss your housing loan questions with a loan officer to get loan facility that best suits your needs.

If the dream property is out of your budget now, consider a smaller property in the same area or moving into a cheaper locality. Don’t just go by someone’s word. Take the promise offered on your home loan in writing or by mail. Try and get your lender to get a valuation done even before the sanction of the loan so that this does not come as a surprise later on. You must analyze whether your income will be able to support the EMI on your home loan or not.

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