A sanction letter is one of the most significant documents when one applies to avail a home loan. Before the final loan agreement, the applicants are provided with a home loan sanction letter confirming their acceptance of the loan offer.
Thus, it is essential for the applicants to be completely aware of the important things related to the housing loan sanction letter.
Some important details about a home loan sanction letter
Below mentioned are five essential things about sanction letters that every prospective home loan applicant must be aware of.
- It is dependent upon the applicant’s eligibility
After the housing loan application is processed, lenders decide whether the applicant will be eligible for the loan or not depending upon their income, credit history, age, etc. Borrowers can check their loan eligibility using the home loan eligibility calculator before applying for a home loan to increase the chances of loan approval.
If the lenders find the applicants to be eligible, they will issue them sanction letters following the exact terms they applied for or make some adjustments as per their eligibility. Before offering this letter, the lenders also consider the present value of the property and its future value estimation.
- Contents included in a sanction letter
A home loan sanction letter includes all the crucial details about the loan agreement, like:
- Total loan amount to be sanctioned
- Type of interest rates, whether fixed or floating
- Mode of loan repayment
- Loan repayment tenor
- Total EMI payable details
- Other terms and conditions associated with it, etc.
An applicant can use the home loan EMI calculator to double-check the EMI based on the details provided here. They can either accept the terms stated in this letter or can ask their lenders to negotiate the interest rates.
- Documents required for the sanction letter
Home loan documents required include the following:
- KYC documents: Voter ID card, Aadhaar card, Driving license, Passport (Any one of these)
- The applicant’s employee ID card (salaried individuals)
- Form 16 or the previous two months’ salary slips (salaried applicants)
- Last 3 months’ bank account statements
- Last 3 years’ proof of business and income tax returns (self-employed applicants).
These are the mandatory documents that one must submit; however, the documents might vary from lender to lender. After verification of these documents, a sanction letter is issued.
- It is valid for only 6 months
Sanction letters are often valid for only six months. Once the specified period expires, the applicants will not be able to accept the loan offer based on the terms stated there.
So, before the lenders issue a home loan sanction letter, it is of great importance for the applicants to be aware of these crucial things. This will also help in better and faster processing of home loans.
How is it different from the final loan agreement?
A sanction letter is definitely not a loan agreement, i.e., it does not legally approve the loan. It just merely states that the applicant’s loan request is approved, but it does not guarantee any loan disbursal.
Even after the sanction letter is issued, the applicants are still accountable for additional documentation and background verification. Even an applicant can also ask their home lenders some important questions if they want.
Also Read: Top 5 Hurdles In Home Loan Balance Transfer
Various financial lenders often provide pre-approved offers to their customers to simplify the loan process. These offers are available on varied financial products like loans against property, and others. Borrowers can check their pre-approved offers from the lender’s website by providing the required credentials like their names and contact numbers.
Thus, before signing the sanction letter, the applicants should carefully scrutinise all the details provided over there, including the home loan interest rates.