Some banks are offering low interest rates. With rates plummeting to single digit numbers, homebuyers are expected to make a beeline for fresh loans. The home loan process is an elaborate, usually oncein-a-lifetime affair. Hence, prospective borrowers must employ due diligence and do a thorough homework.

Here are some simple steps to make the process easy to go through:

Step 1: Identify your dream house

Is the house large enough to accommodate an increase in the size of your family at a later date? Is the neighborhood safe? Is it close to your place of work and children's school? Is public transport easily available? Are shops located close by? Finally, verify the property documents. After scrutinising the property documents, it is time to go hunting for a good lender.

Step 2: Arriving at loan eligibility

Banks will lend you an amount based on your income, age, and salary. If you have defaulted on any previous loan, it will impact your creditworthiness. Increase your loan eligibility by clubbing your income with that of your spouse's.
Do not opt for a huge loan that could jeopardise your finances. One must borrow as little as possible.

Step 3: Selecting a lender

A huge interest rate means larger EMI outflows month after month. Shop around for the best rates offered by lenders in the market.
Do not overlook fees and penalties. Often people get so carried away in their quest for lowest rates that they fail to notice other charges levied by the lender. A lender may offer lower interest rate but may have many clauses and fees. Application fees, processing fees, legal charges, valuation charges, switching charges and prepayment penalties are a few to watch out for.
Not all banks lend the same amount of money for an applicant's income level. Different banks have different yardsticks for calculating an applicant's loan eligibility. Is the lender willing to lend you the money you require? See if the bank maintains a good customer relationship.

Step 4: Apply for a loan

Fill in the application form. Here, the lender requires information about your assets liability, personal and professional data, and cost of the property you intend to purchase. Keep the down payment or margin money that is about 10 to 15 percent ready. You will be required to submit several documents to substantiate your claims.
Some banks charge a processing fee of 0.25 to 0.50 percent of the loan amount. The bank evaluates your repayment ability based on the information provided to them.

Step 5: Verification process

The banks thoroughly verify details provided by the applicant. All details including your existing residential address, your place of employment, employer credentials and financial standing are verified.

Step 6: Credit appraisal

The bank evaluates the amount of credit that can be given to the applicant. If some documents are misleading, the lender can reject the loan application. Your repayment capacity is based on your income, age, salary, experience, employer and nature of business.

Step 7: Sanction and offer letter

The bank sends an offer letter that indicates your loan eligibility. It includes loan details including rate of interest, loan amount, tenure and repayment options. You can negotiate the rate of interest with the lender to your advantage.
If you are in agreement with the terms in the offer letter, an acceptance copy must be given to the banker for its records. The banker conducts a legal check on your documents to validate their authenticity. They make a technical valuation of the property too.
The processing fee is not refundable and if your application is rejected, you will in all possibility lose this money.

Step 8: Disbursement

After signing the loan agreement, the bank makes a lumpsum disbursement. The banker usually retains the original documents pertaining to transfer of ownership of property. When a loan is partly disbursed, the bank does not start EMIs immediately. Instead pre-EMI or simple interest on the loan amount disbursed is charged.

Ahost of projects and willing lenders have made the dream of owning a house a reality for many. Apartments are equipped with unimaginable amenities and luxuries. Banks vie with one another to entice more borrowers and meet targets. The much-awaited moment that both the borrower and builder look forward to is - disbursement. But did you know that disbursement comes in different variants? Let's explore.

A home loan process is a lengthy one that starts off with filling up an application form. After a credit appraisal, scrutiny of your papers, legal formalities, technical check, valuation and collecting fees and margin money, the lender finally disburses the loan. Disbursement is payment of the loan amount by the lender to the borrower to meet his expenses.

Consider the case where the lender decides to disburse the entire amount as in the case of a fully constructed house, with no major work pending. This is called full disbursement. A loan is fully disbursed by the lender only when the builder is a reputed and respected one. Only in rare situations, will a lender fully disburse the loan amount, for a project that is in its initial stages. Otherwise, only for a ready-to-occupy house, the bank disburses the entire loan amount.

Loan disbursement largely depends on the phase of completion of a project. Be it a small house or a large apartment complex, the stages of construction are similar. After planning, drawings and approval, work on the ground commences with laying foundation walls. Then walls are raised. Roofing, plastering, woodwork, painting, electrical and plumbing jobs ensue. When a bank chooses to release the loan in various stages, it is referred to as partial disbursement. Depending on the pace and the level of progress made in the construction, money is disbursed by the lender.

For instance, when the foundation work is complete, the bank may choose to disburse 15 percent of the loan amount. The next release of say 20 percent may happen when the walls are erected. Banks make a partial disbursement for most borrowers who want to buy a house that is yet to be constructed or is under construction.

Advance disbursement is when the lender agrees to release the full amount for a house that is still under construction. This happens if the builder is a reputed one or the lender is convinced that the developer will complete the project on time. The lender can also make an advance disbursement when the borrower requests for it.

How do these variants impact the borrower? Would partial, full or advance disbursement make a difference to the borrower?

There is a larger element of risk involved in case of advance disbursements. The borrower is tied down financially to an asset that does not exist. It is very important for the borrower to read the agreement word by word before signing the deal. Most clauses are heavily tilted towards the lender. This leaves the borrower exposed to consume all sorts of risks. Starting from interest rate hikes to almost every risk is passed on to the borrower. This calls for adequate caution on the part of the borrower now rather than repenting later.

In case of partial disbursement, pre-EMI is a lower burden since it is computed on the amount disbursed at each stage rather than the full loan amount. In case of advance disbursements the EMI clock starts ticking for the entire loan amount, even before the construction is complete.