Home loan sanction and disbursement are two important processes of home loan processing. The sanction is proof that your home loan has been approved by the lender Banks/NBFCs/HFCs, which is validated by issuing a home loan sanction letter and hence the housing loan sanction letter serves as proof that you are eligible for a home loan for the mentioned amount on the sanction letter. While disbursement, on the other hand, means receiving the approved loan amount from the lender post your property valuation and legal.
The home loan process can broadly be divided into 3 steps:
- Make a home loan application – Apply for a home loan online or offline.
- Get a home loan sanctioned from the lender i.e., the sanction process.
- Home loan disbursement process.
Home Loan Sanction Process
On making a successful home loan application to the lender either offline or online home loan sanction process begins. Ensure you fill in the correct details on your home loan application such as your residential address, employment details, income details, contact details, etc. while applying for a house loan mainly because when you make your home loan application to a lender, the lender makes a background check to verify your personal details filled in the home loan application form. Therefore, make sure your credentials are correct before you apply for a housing loan. If the lender is not convinced about your credentials, there are chances that the lender might reject your housing loan application. If the lender is satisfied, he approves your home loan and issues a sanction letter of home loan for the approved loan amount.
The sanction letter typically contains the following.
- Basic details of the applicant – name, address, and contact details.
- Home loan sanctioned amount.
- Home loan interest rate applicable.
- Applicable interest rate type i.e., fixed home loan interest rate or floating home loan interest rate.
- Home loan tenure.
- Home loan sanction letter validity.
- Home loan EMIs and Pre-EMIs (if any).
- Home loan processing fees and a list of other charges.
- Pre & part payment/ foreclosure conditions & charges (if any).
- Applicable terms of disbursement of the home loan amount, i.e., the PSD conditions of home loan.
Generally, the home loan sanction letter is valid for a maximum period of 6 months, within which you have to finalize a property. If you fail to finalize within the sanction validity you might have to go through the entire sanction process once again and once again pay the applicable processing fees separately thereon. However, you may get a chance to re-sanction your home loan simply by submitting your latest financial documents if you finalize the property within 1-2 months after the expiry of the sanction letter.
Remember, your home loan is sanctioned only based on your personal & financial credentials. Therefore if you are planning to purchase a house, it is better to get a home loan sanction letter from the bank before you make a purchase commonly referred to as pre sanction home loans or pre-approved loan sanction letter. This helps you to know where you stand concerning your home loan eligibility and accordingly plan for the property budget. Hence, the pre-sanction loans i.e., the loans applied even before finalizing the property are subject to property clearance i.e., the property valuation and clear title of the property. (Also Read: How To Apply Online Home Loan With ICICI Bank.)
Housing Loan Disbursement Process
Disbursement is a home loan process after sanction. It is the last process for funding your property. The disbursement is a process of 7-8 working days. However, the home loan disbursement time varies with the lenders. It is a process where you pledge your property by submitting the original set of property papers along with a duly signed application for home loan disbursement i.e., the disbursement agreement of the lender. The original property papers will remain in the custody of the lender till the time you repay in full the borrowed principal and the interest amount back to the lender.
|Apply For HDFC Home Loan Sanction Letter Online|
Home Loan Disbursement Stages
Following is the step-by-step important home loan cheque disbursement process
- Conducting Legal & Technical of the property
Property legal & technical is an important procedure after home loan sanction. The technical is the physical inspection of the property to know its age and market value. This process ascertains that the lenders do not over-lend the cost of the property, while the legal is a process where your property papers such as sales deed, index 2, plan copy, etc. are examined by the lender’s lawyers and a legal report of the property is hand-over to the lender. The legal is conducted to ascertain the risk in funding the property. For a successful application for disbursement of home loan it is mandatory to have a clear and marketable title for the property. (Also read: What loans can I get on my property?)
2. Submitting The Original Property Papers
You have to submit the original documents of the property with the lender. The property documents will vary depending on the source from which you are buying a property i.e., whether the property is a resale transaction or a builder transaction. (Also Read: What is advantageous, buying a resale or builder property) Therefore for home loan disbursement for under construction property that you buy from a builder/developer all you need to submit is the property agreement, cost sheet, OC/CC and the plan copy along with NOC from the builder & for home loan disbursement for resale flat you need to submit the chain of agreements, property layouts, sellers details, etc. For the complete list of documents required for home loan disbursement please refer to the links mentioned below.
(a). Home loan Resale Case for salaried, for self-employed – Proprietorship firm, Private Ltd. Company, Partnership Firm.
(b). Home loan from builder for salaried, for self-employed – Proprietorship firm, Private Ltd. Company, Partnership Firm.
3. Fulfilling the PSD conditions mentioned on the sanction letter
PSD are the special conditions levied for approving your loan. Such conditions are mentioned on your sanction letter and are to be fulfilled for the disbursement of the loan. Example of PSD condition, mandatory account opening, maintaining fixed deposits with the lender banks, loan closure letter, mandatory salary credit for the newly joined employees, etc.
4. Pay Down Payment For The Property Purchase
Before the disbursement of the home loans, you have to ensure that you pay your part of the contribution which is the down payment for purchasing your house. The amount of down payment may vary depending upon the cost of the property. However, the standard percentage of down payment is 10%, 20% & 25%. Alternatively, you can also decide the amount of down payment you want to put. Click to know how big must be your down payment on a home purchase.
On the successful validation of the property your home loan amount will be disbursed either in full or it will be part disbursement of home loan depending on the type of the property you finalized. For resale property the full disbursement of home loan amount will be credited to the seller’s account and in the builder case to the builder account. For the under-construction properties there will be partial disbursement of home loans to the builder according to the completion status of the construction of the project. (Also Read: Quick Guide To Difference Between Home Loan Builder Case & Resale Case)
Home Loan Sanctioned But Not Disbursed
It is not mandatory that a sanctioned loan has to be disbursed. The reasons for non-disbursement of loan may vary, but following are the common reasons for a home loan sanctioned but not disbursed.
- Delay in finalizing the property.
- Location of the property. The area is blacklisted by the lender.
- The property deal is postponed or cancelled.
- You get a better home loan deal with other lenders.
- You have a higher home loan requirement.
- Suit filed on the property or legal issue in the property.
- The project or the builder of the property you are purchasing is blacklisted by the lender.
- Low valuation of the property.
- Missing property papers.
- Not fulfilling the PSD conditions on the sanction letter.
- Processing fees cheque bounce.
Must Read: 10 Common Home Loan Mistakes
At times the actual disbursement amount can be less than the home loan amount sanctioned. This is mainly because the disbursement of the home loan is subject to the legal and technical assessment of the property. The technical verification assesses the market valuation of the property while the legal verification assesses the clear and marketable title of the property. These two are vital processes of housing loan disbursement stages and are the major reasons for the majority of the rejections in the home loan applications. Therefore, to avoid the rejections in home loan disbursement after registration of the property, remember to fulfill the following conditions of loan disbursements: –
- All PSD conditions mentioned in the sanction letter are fulfilled.
- The Loan-to-value percentage in home loans is maintained. There are RBI guidelines for home loan disbursement for LTV ratio. The LTV % varies with the market valuation of the property. The maximum loan to value i.e., max LTV in home loan is 90% of the market value of the property. Read more on LTV(Loan-To-Value).
- Availability of all property papers in accordance with the legal report of the lawyer.
- Own contribution for purchasing the property is paid to the seller.
Now that you know the difference between the loan sanction vs loan disbursement, let us address some common questions on home loan sanction vs disbursement.
Q. What is the home loan disbursement time after approval of a home loan?
Ans: The disbursement is a process of nearly 7-8 working days subject to the fulfilment of the disbursement conditions and timely submission of the documents required for disbursement of housing loan. The turnaround time for disbursement may vary with the lender. The turnaround time for the two best banks for home loan namely ICICI & HDFC for sanction as well as disbursement is as follows:
- HDFC home loan sanction time – 10-15 days.
HDFC home loan disbursement process time – 10-15 days.
- ICICI home loan sanction letter/ ICICI pre approved home loan sanction letter – 7-8 days
ICICI bank home loan disbursement process time – 7-8 working days.
Q. What is the home loan disbursement process for under construction property?
Ans: The disbursement for under construction property will be partial as per the demand letter from the builder.
Must read- Important fact while purchasing an under-construction property, before you buy one.
Q. What will be the EMI for the first disbursement home loan?
Ans: The first disbursement of your home loan will be as per the demand letter from the builder. You will be paying pre-EMI on the amount of home loan disbursed. Pre-EMI means paying only the interest on the partial disbursement of your home loan amount.
Q. What is the ICICI home loan sanction letter validity?
Ans: ICICI bank sanction letter for home loan is valid for 6 months. Read to find out why to apply for a home loan with ICICI Bank.
Q. What is the HDFC home loan sanction letter validity?
Ans: HDFC loan sanction letter is valid for a maximum period of 6 months.
Q. What is the procedure after loan sanction?
Ans: After the home loan sanction, you need to submit the property documents to the lender for doing the property’s legal & technical which is the most crucial process of the disbursement stages. On successful reports of the two processes, you may go ahead with signing the agreement with the lender for the loan disbursements.
Q. After home loan disbursement process, how long does it take for the money to be credited?
Ans: The time for the money credit depends on the mode for your home loan disbursement. If the home loan is disbursed through RTGS, it is credited within hours and if the amount is disbursed via cheque the loan amount credited will depend on time taken for clearance of the cheque.