Before you apply, know how the sanctioning and home loan disbursement is different

If you are looking to take out a home loan to purchase a residential property, banks and other lending institutions need to go through a simple process before handing you the loan amount.

By V Swaminathan

Finding a house that you can finally call your own takes time. And if you want to take out a home loan to buy the residential property, once completed, banks and other lending institutions need to go through a simple process before handing you the loan amount. The process starts with applying for a home loan, followed by the approval of the loan, and finally the payout. Here is an overview of the process that leads to home loan approval and disbursement.

Loan application process

First of all, the loan applicant must first submit the application to the bank and then the lender decides whether to approve the loan or not. After the background check and the detailed examination of the documents, the bank then sends a notification of approval to the loan applicant. Also, the bank will review the borrower’s income and CIBIL score before approving the loans.

Sanction proceedings

Loan sanctioning is the process by which the bank approves the applicant’s loan. The bank issues loans based on the borrower’s income. In this case, if the loans are sanctioned, then the borrower can get a certain amount of the loan, which is sanctioned by the bank.

The bank grants borrowers loans up to 80% of the property value. The borrower can avail an even smaller loan amount compared to the higher eligibility. The loans can be repaid over the years that the tenure is approved.

The sanction process is the approval process in which the bank approves the loans and later disburses the loan amount. The sanction confirms the approval of the loan and thus the borrower can proceed with the purchase of the property.

In this case, once the bank approves the loan, the bank will provide the sanction letter, which must be presented to the real estate developer to confirm the booking of the apartment, and the applicant can proceed with the deposit.

In the sanction procedure, the borrower receives the financing in installments and in the case of resale, the lender pays the entire loan amount at once.

Withdrawal process

Loan disbursement takes place after the loan is approved. Thus, the withdrawal helps the buyer to pay the money to the buyer and, accordingly, the buyer can complete the payment process for the property.

When paying out the resale property, the bank credits the entire amount to the borrower’s bank account, while the lender pays the installment to the builder as agreed, as is the case with new buildings, and also depending on the construction work.

The disbursement of the loan requires the property documents for the planned property as well as the estimated cost of the property. If the price indicated by the applicant is found to be reasonable by the bank, in this case the bank sanctions the borrower’s loan after completing the formalities, the bank pays the loan amount to the borrower’s account.

The bank begins collecting the EMI immediately after the loan has been paid out. The due installments are paid on time by the borrowers. Thus, the loan must be paid out on time after the approval when buying a house. The buyer can only take possession of the property after the property has been paid for in full.

Loans can be taken out from all lenders for both new build and resale properties. The loans can be taken out by any of the lenders among the private banks, credit unions, or public sector banks or NBFCs. The loans can be approved for a maximum term of 30 years. The interest rates on the loans are in the range of 6.40-12% per year. The borrower should repay the borrowed loans in a timely manner in order to avoid penalties. Thus, the interest rates on the loans are available to the borrower at competitive interest rates.

(The author is CEO, Andromeda Loans and Apnapaisa.com)

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