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Published On: Thu, Sep 24th, 2020

All You Need to Know About Your Home Loan Sanction Letter

Getting the home loan sanction letter from the lender is an important part of the home loan application process. Once the lending bank or financial agency has checked the applicant’s eligibility, it issues a document/letter known as home loan sanction letter. The letter indicates that you meet the eligibility criteria for home loan approval. It is issued after the lender has thoroughly checked the applicant’s current income, credit history and repayment capacity. However, it is different from the final loan agreement and it is not a final legal loan approval.

photo/Gerd Altmann

Here are a few facts which you must know about your home loan sanction letter:

1) Eligibility Criteria- The lender looks into the financial credibility of the applicant before deciding whether the applicant is eligible for the home loan or not. Here are some factors which the lender takes into consideration before offering home loan sanction letter to the applicant: 

  • Current Income of the applicant
  • Repayment capacity of the applicant
  • Credit history of the applicant
  • Documents submitted by the applicant
  • Market value of the property the applicant intends to purchase
  • Legal validity of the property the applicant intends to purchase
  • Market value of the collateral property

2) Contents- You need to thoroughly check the contents of the sanction letter before deciding to agree with the terms and conditions. The sanction letter has the following contents:

  • Total amount of loan sanctioned
  • Loan repayment tenure
  • Type of interest applicable : fixed/floating/hybrid
  • Base rate for calculating interest
  • Interest rate at the time of loan disbursal
  • EMI and pre EMI amounts wherever applicable
  • Validity period of the sanction letter
  • The terms and conditions which will be incorporated in the loan agreement

3) Validity – A home loan sanction letter is valid for up to six months. The loan offer in your sanction letter lapses after a period of six months. Hence, you need to complete all the loan application proceedings including submitting all the required documents within the time frame of six months. It must be noted that a home loan sanction letter is different from a loan agreement. Your loan disbursal is considered final only after you sign the loan agreement. The home loan sanction letter is just an approval of your eligibility to proceed with all the formalities that are required in the loan application process.

Considering that the home loan application process is tedious and usually requires a lot of paperwork, it is preferable to go for a financial company which requires minimum paperwork for home loan application. It is also advisable to use a home loan emi calculator that calculates the exact EMI that you would have to pay on your home loan as per the loan amount, tenure and rate of interest. 

Author: Sanvi Kapoor

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