How are home loans processed and disbursed?

1. Loan application form and documents
 

The first step in the home loan procedure is filling out the home loan application form. You will need to furnish personal and financial details to help the lender assess your loan eligibility. You will have to attach the following documents to support the information on the form, such as:

·     Identity proof

·     Age proof

·     Address proof

·     Income proof

·     PAN card

·     Proof of educational/professional qualifications 

·     Employment details

·     Bank statements

·     Property details (if finalised)

2. Payment of processing fee
 

Lenders usually charge a loan processing fee that is non-refundable. The home loan processing fee may vary from bank to bank based on the loan amount. It is used to start and carry out the home loan process seamlessly. To save money, look for a lender that charges a low processing fee. For instance, IDFC FIRST Bank charges as little as up to 1% of the loan amount. 

3. Discussion with bank officials
 

After submitting the application form and completing the documentation process, the bank may ask you to have a face-to-face chat. This discussion will extract more information about you and ensure you can repay the loan amount. You can also use this meeting to clarify doubts about the loan, repayment options, interest rates, or miscellaneous fees. 

4. Evaluation of the documents
 

The bank now evaluates all the information furnished by you. This is a crucial step in assessing your credibility. A bank representative may also visit your home or workplace to verify the details and check the references mentioned in the form. The lender then evaluates your credit history using the records in the Credit Information Bureau India Limited (CIBIL).

Bear in mind that any incorrect information or outdated documents will delay the loan process unnecessarily. Your loan will be approved as long as all the information provided by you is correct and meets the lender's eligibility criteria.

5. Issuing of offer letter
 

After the loan approval, the bank sends you a certified offer letter that includes details about the loan amount, interest rate and type, loan tenure, mode of repayment, and other terms and conditions. This is an important step in the home loan process, and you should go through the details carefully before signing the offer letter. You can accept or reject this offer.

6. Property check followed by a legal check
 

If you accept the offer letter, the lender will initiate a legal and technical check of the property in question. If the property is not finalised, you can ask for some time from the bank. However, after you select the property, the lender will ask you to submit the original property documents, such as the title deed and no-objection certificate (NOC). The bank keeps these documents until you repay the loan to secure the principal amount. Once you provide the documents to the bank, it sends them to a lawyer for a legal check. The lawyer verifies the documents and approves them. In case of any discrepancies, the bank may ask you for more documents.

7. Technical checks and site estimation
 

The lender will perform a technical check and site estimation as part of the home loan process. A legal review of the property ensures there are no disputes involved and all titles are clear. A bank employee or a civil engineer is sent to the site if it is under construction to verify details such as: 

·     Stage and quality of construction of the property

·     Time remaining to build the home

·     Permits from governing authorities

·     Property valuation

·     Ensuring the builder has required certificates to construct the property

If the property is already constructed, the lender evaluates its age, construction quality, maintenance, property valuation, legal clearance, etc. This ensures the property is not risky for the lender. You may have to pay a technical check fee and site estimation amount to the lender, which is either included in the upfront amount or paid separately. After this, the lender estimates the property value (to ensure the property rates are justified) and sets the loan sanction amount.

8. Finalising the loan agreement
 

After completing all verifications, the final registration of the loan happens. The bank then drafts, signs, and stamps the final loan document.

9. Signing the loan agreement
 

After completing all the paperwork, the bank will ask you to sign the loan agreement and submit post-dated cheques for the agreed term. Before signing the loan agreement, you must verify all the loan details, such as interest rate and type, loan tenure, EMIs, and other loan terms and conditions. You need to hand the original property documents to the bank. The documents remain with the lender until you pay off the entire loan amount.

10. Loan disbursal

After signing the loan agreement, the bank disburses the loan amount via a cheque according to the terms and conditions. If the property in question is under construction, the lender will disburse the sanctioned loan in parts according to the construction progress.

To Sum It Up
 

Now that you know how to apply for a home loan, you can plan your home purchase without any doubts or uncertainty. Remember to provide correct information to the lender, properly follow the home loan process steps, and check all the details before signing the agreement. Do compare various lenders so you can make an informed decision. Choosing a bank with a simple loan procedure can make a huge difference as it eliminates stress. For example, IDFC FIRST Bank offers convenient options with minimal documentation. What’s more, the interest rates are among the most attractive.

Disclaimer
 

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank 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 mentioned. Please consult your financial advisor before making any financial decision.