What is a home loan sanction letter, and why is it important?

According to an article published in the Financial Express, there has been a 25% to 40% rise in housing loan applications across cities. Given how a home loan allows individuals to realise their dream of owning a house along with the low-interest rates and increasing urbanisation, such figures are pretty expect. 

Individuals, especially first-time borrowers, must be aware of all the various essential aspects of the entire loan procedure. A home loan sanction letter is a significant aspect of this lengthy process that will be discussed in this article.

What is a housing loan sanction letter?

A home loan sanction letter is an official document issue by a financial institution extending the credit instrument to an applicant. This formal letter is signed by the lending institution’s concern authority and comprises the terms and conditions depending on which the housing loan will be offer. It aims at formally informing a borrower that the loan has been approved. This document contains several important details, such as:

  • Total loan amount sanctioned
  • Loan repayment tenor
  • Applicable interest type (floating, fixed, and hybrid)
  • Rate of interest on home loan at the time of disbursal
  • Base rate for interest calculation
  • Loan EMI amount and pre-EMI amount (if applicable)
  • Validity period of a sanction letter
  • Terms and conditions of a loan

Before providing the sanction letter, a lending financial institution verifies the following aspects of an applicant after the lengthy loan process is initiate:

  • Legality of the property being purchase through a housing loan
  • Current income 
  • Repayment capacity
  • Credit history
  • Authenticity of every personal document submitted
  • Expected and current market value of the property acting as collateral

Individuals must ensure to opt for a reputed financial institution, and prior to acquiring a home loan, they must check their eligibility criteria. They can use a home loan eligibility calculator for determining their eligibility for this credit instrument.

Opting for a reputed financial institution will allow individuals to benefit from the several extended offers. This includes pre-approved offers that accelerate a lending process and makes it hassle-free. These offers are provided on multiple secured and unsecured financial products. Individuals can check their pre-approved offers by providing details like their name and contact number.

Importance of a housing loan sanction letter

In the three-stage home loan process, the sanction stage is crucial because a particular loan is either rejected or approved at this stage.  Once a loan is approve, the applicant receives this official document from the lending institution.

A sanction letter acts as proof of a borrower’s loan eligibility, gives them an idea about their loan and informs them about the EMI payable. 

Further, individuals are require to submit a copy of this sanction letter to a housing society or developer when they buy a house. This formal document also acts as proof during legal disputes between a lender and a borrower related to a breach of the terms and conditions.

Borrowers must note that a home loan sanction letter is not a legal approval of a housing loan. They need to sign the home loan agreement and submit additional documents before disbursal of the loan amount.

A housing loan sanction letter is valid for around six months, and the sanction shall lapse if one does not avail of the loan amount during this period. For that case, one would then have to go through the complete procedure again for acquiring a housing loan in India.

By now, it is evident that a home loan sanction letter is a vital piece of document. So property buyers receiving it must ensure to preserve and furnish the same when required.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button