Today, applying for a home loan is convenient and straightforward. All you have to do is fill the online application form, upload your required documents for home loan, and hit the submit button.
If your lender approves your application, you will receive a sanction letter and get the loan amount credited to your account. This process is referred to as loan disbursement.
However, the process is not as simple as it sounds! Read on to learn more about the different home loan disbursement stages.
1. About Loan Sanction
Your lender asks for documents related to your income and the property you are purchasing. This is because lenders need to assess your home loan eligibility and verify the authenticity of your property before sanctioning your loan. If they find everything satisfactory, they will send you a sanction letter in a few weeks.
2. What is a Home Loan Sanction letter, and what documents are required?
Your sanction letter is a written document stating that your lender has approved your home loan. Typically, a sanction letter states the following:
- Your sanctioned amount
- Tenure
- Repayment mode
- The applicable home loan interest rate
- Type of interest rate, fixed or floating.
- Special schemes, if any, depending on your lender
- Tax benefits
- Terms and conditions of your lender
Moreover, your sanction letter comes with a 'valid until' date, which is usually six months from the date of sanctioning.
Once you receive the sanction letter, go through it carefully. Then, sign and submit the acceptance copy of the letter to the lender. Some lenders might charge a small administrative fee for this process.
Nevertheless, make sure you send your signed copy well within the validity period. Once the validity period is over, you may have to go through the entire application process again.
Additional Read - Importance of Home Loan Sanction Letter
What is the Process of Home Loan Sanction?
After the loan approval, the lender offers a sanction letter to the borrower. This sanction letter allows the borrower to confirm the booking of their new property and give the down payment. The process of home loan sanction involves the following steps-
1. The lender will verify if the borrower meets the eligibility criteria for the home loan. This includes the borrower's age, income stability, credit score, borrowing history, etc.
2. Next, the lender will verify the property documents to ensure their authenticity.
3. The lender will ask for necessary documentation for the home loan approval process, such as ID proof, photographs, income proof, bank statements, residence proof, property documents, etc.
4. They will also determine the borrower's financial ability to pay the margin money. Margin money is the down payment made towards the total cost of the house. If the amount of margin money is high, the lender might ask for additional documents as proof of margin money.
5. Once all the documents are verified, the sanction letter will be issued. This letter includes details such as the sanctioned loan amount, repayment period, rate of interest, floating or fixed interest rate, validity of the sanction letter, etc.
3. what is loan disbursement?
Disbursement is the final step in the loan process.
After you submit a signed copy of your home loan sanction letter, your lender will verify your property papers deeply. Moreover, a technical officer will examine the quality of construction, measure your property's area, and note other details. A lawyer will recheck the authenticity of the property documents to ensure that it is not disputed.
Based on the results of this verification, your lender will evaluate the cost of your property. And finally, send you your loan agreement.
4. Loan agreement
Your loan agreement states your loan terms and describes how your lender will disburse your loan. This is typically different for fully constructed and under-construction properties.
Most lenders disburse the entire loan amount for fully-constructed properties. In this case, you will have to pay a fixed EMI, which you can evaluate in advance using a home loan EMI calculator.
For under-construction properties, however, your lender may disburse your loan amount in instalments. They will notify you each time they credit the amount to your account. In this case, the EMIs are proportional to the total loan disbursed.
Additional Read - How to Get Home Loan in India – Get Detailed Information Now
In conclusion
Since there are various steps involved in the loan disbursement process, you must be careful throughout. Read all the fine print and reach out to your lender in case of any queries.
If you want to apply for a home loan, Tata Capital is here for you. We provide loans at affordable interest rates and offer flexible repayment options. Visit our website today!
FAQs
1. What happens if a loan is sanctioned but not disbursed?
If a loan is sanctioned but not disbursed, it means that while the loan application has been approved, the funds have not yet been released to the borrower. The time between the loan sanction and disbursement can differ from one lender to another, and the borrower can contact the lender in case of delays.
2. Is EMI based on the sanctioned amount or the disbursed amount?
EMI (Equated Monthly Instalment) is calculated based on the disbursed amount, not the sanctioned amount. The sanctioned amount is the approved loan limit, but the EMI payments are determined by the amount disbursed to the borrower.
3. How much time does it take to disburse a home loan after sanction?
The time taken to disburse a home loan after sanction varies but typically ranges from a few days to a few weeks. The duration depends on the lender's internal processes and may vary if they require additional documents from the borrower.
4. What is the difference between sanction and disbursement?
The sanction of a loan refers to the lender's approval of the loan application and the agreed loan amount. Disbursement, on the other hand, is the actual release of funds to the borrower after meeting all required conditions and documentation.
5. Can a bank cancel a home loan after disbursement?
Generally, a bank cannot cancel a home loan after disbursement. They might, however, reject the loan application even after the sanction letter if there is a drop in the credit score or job instability.
11 July 2024
6 mins read
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