Overview, stages & claim limit in Home Loan disbursement process

Buying your dream house is one of your most important decisions. Many people opt for a home loan to fulfil this dream, and they typically have to undergo several steps, starting with home loan applications and ending only at home loan disbursals.

The loan process concludes once the disbursement occurs, marking the actual transfer of funds by the bank. Usually, a home loan is disbursed in tranches. For properties under construction, disbursement happens with different stages of completion.

What is Home Loan Disbursement, and how does it work?

Loan disbursement is the last step of a home loan process; however, it is a crucial one. Your journey in the home loan process begins with the application for the loan, followed by the sanctioning process, and ultimately, the disbursement stage.

The bank directly transfers the payment to either the seller or the developer. Throughout this process, rigorous document verification and technical and legal evaluations of property papers take place. These evaluations involve studying link documents, title deeds, and floor plans.

The home loan disbursement process can be segmented into three stages i.e., Application, Sanction and Disbursement.

Different Home Loan Disbursement Stages

1. Apply for a Home Loan

The application process starts by filling out a home loan application form. However, along with basic details, applicants must provide information about their income, property, or investments within the application.

Here is a list of documents that need to be submitted along with the form: Salaried individuals

• Passport-sized photographs of the applicant(s) and co-applicant(s)
• Proof of identity for both the applicant(s) and co-applicant(s)
• Residence proof of the applicant
• Age proof of the applicant
• Office address of the applicant
• Copies of the last six months' bank statements
• Copies of the previous three months' salary slips
• Copies of the last two to three years' Income Tax Returns
• Copy of Form 16
• Details of investments such as Fixed Deposits (FDs), insurance, or stocks (if applicable)

Self-employed individuals need to provide these additional documents:

• The business office address of the applicant
• Details of assessed turnover
• Minimum six months' balance sheet
• Profit and loss assessment copy
• Income Tax returns
• Copies of owners' and firms' GST returns
• Receipts for advance tax payments
• Complete set of property documents for the intended purchase

2. Home Loan Sanction

Once you've completed the application process, the bank or lender will proceed to review your application form. The bank's legal experts will then undertake a thorough legal and technical examination of your property details.

They will conduct an on-site inspection of the property to assess its construction quality and location. The bank's legal department will only check the NOC and the sales deed.

Once the verification is complete, you will receive your home loan disbursement letter. This letter will confirm the status of your loan sanction. The sanction letter will specify details such as the disbursed amount, instalment dates, loan tenure, interest rate, and the validity period of the allotment letter.

3. Procedure for Home Loan Disbursement

Once you receive the sanction letter, you must pay your down payment and provide the property documents to the bank officer. The actual disbursement of the loan occurs after you provide a receipt from the builder or seller confirming receipt of the down payment.

The bank may disburse the loan amount in one go or in installments, depending on your credit score and the progress of the property construction. If the construction is complete, the entire home loan amount is disbursed. Hence, the home loan disbursement’s time for approval varies for applicants based on the property's completion.

Once the loan is disbursed, interest begins to accrue. You will be charged interest for the pre-construction period on the disbursed loan amount, and once the construction is completed, your home loan EMI payments will commence. Disbursement occurs in stages aligned with the progress of the project's completion.

Home Loan disbursement eligibility criteria

Your eligibility depends upon your age, credit score, surplus income, income versus expenses ratio, additional income from family members, investment portfolio value such as shares and stocks, total assets, and income stability versus liabilities, all of which show your repayment capacity.

The bank's primary objective is to ensure that you have the financial capability to repay the loan. Banks consider around 50% of your disposable income as the repayment amount, hence a higher income often results in a higher loan amount.

Maximum disbursement claim

Before applying for a home loan, determine how much down payment you will make to the seller. This will help you calculate the home loan disbursement amount you must request from the bank.

Most homebuyers pay around 10% to 30% of the property's value as a down payment. The remaining amount is usually borrowed from the bank.

When obtaining a home loan, knowing your borrowing capacity and determining the maximum disbursement claim you can make is essential. This knowledge helps budget your home purchase and prevents excessive debt accumulation.

Here is a table illustrating an estimated maximum disbursement claim you can expect based on your income:

Also Read: Types of Home Loans: 5 different kinds of Home Loans

Conclusion

Mastering the intricacies of the housing loan disbursement stages is essential in realising your dream of owning a home. This understanding enables you to have a smooth journey through the loan application, ensuring a stress-free and successful outcome.

Get started with your Home Loan journey today with Axis Bank.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.