Home Loan Disbursement Process

A Home Loan disbursement is the stage at which the lender approves and transfers the loan amount into the borrower's bank account. This is done in accordance with the financial institution’s terms and conditions.

Home loan disbursement is the final step where your lender releases the approved loan amount either to you or directly to the property seller. This process follows the terms and conditions set by the financial institution.

Before disbursement, the lender conducts thorough verification of your documents along with technical and legal evaluations of the property. These checks include reviewing ownership documents, title deeds, floor plans, location, and more.

The process involves several stages, each designed to ensure the secure release of your loan amount:

1. Application and Approval

The first step in the home loan disbursement process is submitting your loan application to the lender. The lender evaluates your eligibility, considering factors such as credit score, income stability, and employment status. Based on this assessment, the lender approves or rejects your loan request.

2. Request for Disbursement

Once the loan has been sanctioned, you can request the lender to disburse the loan amount. Meanwhile, arrange for documents, which vary based on the type of property you intend to purchase:

• Under-construction Property: In this case, documents like the allotment letter, demand letter, payment receipt, post-dated cheques, etc., are required

• Ready/Resale Property: For a ready-to-move-in or resale property, you will be required to furnish a sales agreement and the complete chain of property ownership documents. 

 To know the exact list of documents required, contact your lender and seek assistance.

3. Verification and Processing

Once you submit the documents, the lender conducts a technical and legal examination of the property. Simultaneously, the lender verifies your personal and financial documents. After collecting all necessary signatures and processing the loan fee, the lender prepares your loan amount for disbursement.

4. Final Disbursement

In this stage, the lender will transfer the sanctioned loan amount to you. This could be in the form of either a full or a partial disbursement. The type of disbursement depends on the stage of property construction.

If the lender releases the full amount, you start paying EMIs from the following month. In the case of a partial disbursement, you need to pay a pre-EMI (only interest) on the portion already released until the full loan amount is disbursed.

To ensure smooth disbursement, lenders require you to submit a set of documents. These help authenticate you and verify that the property meets the lending criteria. Documents typically include:

Identity Proof:

• Aadhaar card

• Passport

• Driving licence

• Voter ID card

Residence Proof:

• Voter ID card

• Passport

• Driving licence

• Aadhaar card

• Utility bills

Income Proof:
For Salaried Applicants

• Last 3 months' salary slips

• Form 16

• Bank statements from the previous six months

• ITR of the previous two years

For Self-employed Applicants

• ITR for the previous two years

• 6 months of the primary bank statement

• Copy of the firm’s service tax/GST/VAT returns (as applicable)

• Advance tax payment slips (if any)

• Balance sheet of the previous six months

• Assessment copy of profit and loss

Property Documents

• Sale agreement

• NOC from the builder

• Property title deed

Other Documents

• Age proof

• Office address proof

• Investment details (if any)

• Co-applicant’s identity proof

• Co-applicant’s passport-size photographs

• Construction cost estimate

• Approved copy of building plan

• Sanction letter

• Encumbrance certificate

Submitting these documents ensures timely verification and helps avoid delays in loan disbursement.

Several factors determine how and when a home loan is disbursed. Lenders assess these carefully to ensure the property is legitimate, the loan is secure, and you can repay it on time. Some of the key factors include:

• Property Verification

The lender appoints technical experts to inspect the property to confirm its location, size, and condition. Its legal experts review property papers and the title deed to ensure there are no legal disputes. The lender disburses the loan only if the property meets its standards.

• Loan-to-Value (LTV) Ratio

The LTV ratio determines how much the lender lends as compared to the property’s value. Typically, lenders finance up to 80% of the value, while you contribute the remaining 20% as a down payment.

• CIBIL Score

Your CIBIL score, ranging from 300 to 900, reflects your creditworthiness. A higher score indicates stronger repayment capacity. Lenders consider your score to determine loan disbursement and terms.

• Other Loan Eligibility Criteria

The lender evaluates your income, age, employment status, and overall repayment capacity. It also considers existing loans and your debt-to-income ratio to determine the maximum loan amount it can offer you.

Staying organised, proactive, and transparent helps prevent delays and ensures the timely release of funds. Follow these tips to streamline the home loan disbursement process:

• Keep all required documents, such as the sale agreement, building plan, cost estimate, and legal clearances, ready in advance

• Communicate clearly and regularly with your lender, builder, and legal advisors to maintain a seamless flow of information

• Make payments to the builder on schedule to avoid construction and disbursement delays

• Monitor construction progress and follow up with the builder to receive demand letters and other necessary documents promptly

• Inform your lender immediately about any changes in the construction timeline or other relevant developments

Staying organised, proactive, and transparent helps prevent delays and ensures the timely release of funds. Follow these tips to streamline the home loan disbursement process:

• Keep all required documents, such as the sale agreement, building plan, cost estimate, and legal clearances, ready in advance

• Communicate clearly and regularly with your lender, builder, and legal advisors to maintain a seamless flow of information

• Make payments to the builder on schedule to avoid construction and disbursement delays

• Monitor construction progress and follow up with the builder to receive demand letters and other necessary documents promptly

• Inform your lender immediately about any changes in the construction timeline or other relevant developments

You typically start paying EMI for your home loan the month after the lender disburses the loan amount. If the lender releases the full amount at once, your EMIs begin the following month. In case of partial disbursement, you pay pre-EMI on the amount already released.

Once the full loan has been disbursed, you begin regular EMI payments according to the agreed schedule.