Complete Guide on Home Loan Disbursement and Sanctioning Process

What is Home Loan Disbursement?

Before you apply for a Home Loan, having a clear understanding of the Home Loan disbursement process is important. Home Loan disbursement is the process through which the approved Home Loan amount is credited to your bank account. This process relies on the terms and conditions of your chosen lender. The Home Loan disbursement process comprises 3 stages — form filling, document sanctioning, and finally, Home Loan disbursement.

Another important aspect of your Home Loan disbursal is getting your Home Loan sanction letter, as this alone holds all the information essential to your Home Loan disbursal. Read on to understand this document better.

What is a Home Loan Sanction Letter?

A Home Loan sanction letter is a document offered by your lender approving your Home Loan application. It contains the details of the loan agreement, including:

• The Home Loan amount
• Applicable rate of interest – fixed or floating
• The rate of interest
• The repayment tenure of the Home Loan
• EMI amount
• The EMI repayment schedule
• Details of tax benefits
• Special subsidies/offers (if applicable)

The Home Loan sanction letter is proof that you are eligible for the Home Loan with the predetermined terms and conditions and should be kept safe through the repayment tenure and even after.

How Does the Home Loan Sanction and Disbursement Process Work? 

Once you submit your Home Loan application form along with the required documents, the Home Loan sanction process begins. The lender verifies your documents and evaluates your credit profile to assess your loan eligibility. If the lender is confident of your ability to repay the loan and your loan eligibility, a Home Loan sanction letter is issued to you. The Home Loan sanction letter acts as an evidence of your loan approval. Part of the loan disbursement process is having all the necessary documentation that help you qualify, some of them are as explained below: 

1. Applicants should be eligible on all fronts: Eligibility for a Home Loan is based on factors such as your Income, credit history, CIBIL score, liabilities, and the ratio of earning to spending. 

2. Applicant’s property should have the relevant documents: All applicants must also provide a set of property documents required for a Home Loan, such as the title deed and allotment letter. Note that additional documents may be requested by the lender. 

3. Income Proof: In the case of salaried employees, documents can include salary slips of the last 6 months. The businesspeople need to submit proof of business existence with a vintage of not less than 5 years. 

Also Read: 5 Tips for Lowering Home Loan Interest Rates 

How is the Home Loan Amount Disbursed?

The Home Loan disbursement process begins as soon as the loan gets sanctioned. Using this amount, the buyer can make the balance payment to the builder. In case of an under-construction property, the builders are paid according to the stage of their construction such as 50%, 75%, 90% and so on. For a resale property though, the entire amount gets disbursed at once. Borrowers can expect the EMIs from the next month itself. The following are the steps of the Home Loan disbursal process: 

• The lender first evaluates your application and verifies the documents you submit. 
• The disbursement process of your Home Loan is detailed in your sanction letter – be it in one lump sum or parts.
• The disbursement is initiated by your lender, and the amount will reflect in your bank account within the stipulated period.
• Once the entire Home Loan amount is disbursed, expect to begin EMI payments a month after receiving the sanction amount. 

Difference Between Home Loan Sanction and Disbursement 

Also Read: 10 Factors that Affect Your Home Loan Eligibility 

Conclusion

Loan disbursement is the process that transforms you from a home aspirant to a homeowner. Even though it involves several stages and may take some time, the end result will be worth cherishing – a home that can be called your own!

*Terms and conditions apply.